Faced with higher living costs, low rental vacancy rates and unattainable house prices, young Australians are experiencing an economic crisis that shows no signs of easing — and experts fear it will cause generational inequality to worsen without substantial reform.
In the week since its budget, the federal government's proposals to take the pressure off the high cost of living have been criticised by many younger Australians who say the measures fail to address the fundamental changes affecting their lives.
"What saddens me is that Labor is only tinkering around the edges, they're not getting to the heart of the structural issues that mean that young people are on the front line of the cost of living, housing and climate crisis," Jack Simmons told The Business.
Although the 28-year-old will benefit from the $300 energy bill rebate and the revised stage 3 tax cuts, he is frustrated that high income earners will also benefit from the same measures.
"In a time where wealth inequality is rampant, that to me feels very irresponsible," he said.
"If Labor continues to go along this route of saying the right words without meaningfully addressing the actual systems and structures that enable these crises to continue, things like housing and cost of living, then they will be failing young Australians."
Mr Simmons said that while he is fortunate to have secure work that pays a livable wage and has secure home right now, housing is the area where young professionals feel most disadvantaged.
"I'm in my late 20s, this is the time where I should be saving up for a house deposit. To me, that feels impossible given the way things are at the moment," he said.
"I think the concept of setting myself up, which maybe previous generations have been able to do in their late 20s and early 30s, feels unattainable for me right now.
'Pressure on intergenerational relations'
Recently published research from the Productivity Commission backs up Mr Simmons's anecdotes of generational inequality among young Australians.
"We've looked at measures of wealth and measures of income and, when you combine them, you find that actually older Australians are doing better than younger Australians," Productivity Commissioner Catherine De Fontenay told The Business.
"About half of people in the top 10 per cent of wealth adjusted income are over 55."
The reason for that disparity, Ms De Fontenay said, was largely the increase in the value of assets.
She specifically said that housing was the biggest contributor to that generational divide, and the current environment of higher interest rates also added another layer to the inequality younger people are experiencing.
"There's more pressure on intergenerational relations than maybe there has been in the past," Ms De Fontenay said.
"Higher interest rates are a real pressure point for people in their 30s and 40s, who might be paying off a mortgage. They're also a pressure point for young people that are trying to break into the housing market.
"But if you've mostly paid off your mortgage, they're not so much of a concern, so they're [interest rates] pressuring younger people relative to older people."
The great Australian dream?
For young Australians who grew up wanting to own property in the future, it's become increasingly common to rethink this ambition or abandon it altogether, CoreLogic's head of Australian research, Eliza Owen said.
"The Australian dream of owning your own home is out of reach for younger Australians more and more," she told The Business.
"You only have to look at rates of home ownership to see that we've gone from a rate of home ownership of around 71 per cent in the mid 90s, to about 66 per cent as of 2019.
"So, as much as you want to dissect which generation has had it more difficult to get into the housing market, I think that home ownership rates say it all."
The challenge of saving for a deposit, the size of the deposit required to enter the property market and the time it takes to accrue a deposit makes it almost impossible for young people in the current economic climate, she argued.
"In the last decade, we've seen housing values far outpace income growth … it's so much harder just to accumulate the deposit now than it was even just 10 years ago," Ms Owen said.
"CoreLogic data indicates that is has taken longer to accumulate a 20 per cent deposit over time … it's gone from about eight years, four months to 10 years, four months to accumulate a 20 per cent deposit in the past 10 years.
"That is assuming a 15 per cent savings rate every year. At the moment, the household savings rate is more like 3 per cent, and people are dealing with a higher cost of living, and if they're in the rental market, higher rental costs."
Ms Owen said that the financialisation of housing is part of the reason why the housing market has effectively locked out younger generations.
"Home ownership has implicitly become more of a retirement strategy in this country — you're much more likely to have a comfortable, secure retirement if you don't have housing costs," she said.
For those reasons, Ms Owen said that young people are "completely justified" in feeling frustrated and angry about the current state of Australia's housing market and the lack of solutions being put forward to address it.
Housing supply isn't the only answer
Treasurer Jim Chalmers's third budget focused heavily on housing and boosting the supply of new homes — a position he reiterated to his own electorate on Monday.
Ms De Fontenay said building more homes was a key part of the solution, but state and local governments had a bigger role to play alongside any federal action.
"Planning restrictions are a big obstacle to expanding the supply of housing," she told The Business.
"If we expand the supply of housing, it will become more affordable and accessible to everybody.
"But what we see, this has been a big debate in Sydney for example, is we see a lot of NIMBYism, lots of councils don't want an expansion of housing in their area."
But the goal of simply building more houses to solve Australia's housing crisis fails to address the full scale of the issue for CoreLogic's Eliza Owen.
"One of the challenging things for the [housing] market at the moment is that construction is so constrained, and that's because you've got less construction labour available to deliver the amount of projects in the pipeline," she said.
"We've got a near record amount of projects in the pipeline of residential buildings that are approved but not get complete, so that means you have to look at the demand side for housing.
"How do we have people demanding less bedrooms, less investment properties that crowd out first homebuyers?"
For independent senator David Pocock, constructing thousands of new homes "won't even touch the sides" of a crisis that is disproportionately affecting younger generations.
"What we're seeing the government do is not what I'm hearing that Australians want when it comes to housing," he told The Business.
"They want the government to do what is necessary to ensure that we're not creating a society where you have to have wealthy parents to be able to buy a house, a society where 80 per cent of renters are in rental stress, where there's not a single rental in Australia that someone on Youth Allowance could afford. It's not working.
"We are genuinely in a housing crisis, and we've got to be doing everything we can."
'Politically challenging' conversations need 'courage'
Addressing the housing crisis and making a more equitable property market for younger generations — whether it be to rent or buy — will be a time consuming process, warned CoreLogic's Eliza Owen.
"We're in a situation where there's not much you can do in the short term," she said.
"There's no silver bullet, and there's no overnight solution because it's been decades of policy failure that's gotten us to this point."
From her perspective, there needs to be a serious conversation about tax reform, particularly where investment properties are concerned.
"One of the issues that economists are talking about a little bit more is this idea of a 50 per cent discount on capital gains of investment properties that come into play after just one year of ownership," Ms Owen said.
"That's a pretty big discount, especially when you consider that in today's market property values can go up by hundreds of thousands of dollars over a very short space of time.
"So part of evolving our taxation around housing might be reducing that capital gains discount or shifting it to the long term inflation target over time and discounting it a little bit every year.
"That, for example, might disincentivise short-term selling by investors who all of a sudden get a lot of gain in their property over a short period of time, and that's an example of where it could create a more secure tenancy and investment property and make the housing market a little more effective."
However, Ms Owen acknowledged that introducing more taxes for investors can also disincentivise investor activity.
"I think it's fair to say we're seeing a little bit of that in Victoria at the moment, and there's a tricky balance between creating more space in the finance and housing market for first time buyers, and disrupting rental supply," she said.
"It's a politically challenging time to implement bold tax reform, but I think it's at least worth having a conversation."
Senator Pocock is no stranger to political challenges, and he is willing to lead the charge if it results in a more equitable Australia.
"I hear the major parties talk so much about home ownership, we want to increase home ownership, we want to make it more affordable, we want to make it so young people can buy homes if they want to, yet they won't touch tax reform," he said.
"Our whole tax system is geared towards [housing] being an investment vehicle, and we need to change that.
"It's not working for Australians at the moment, and we need some political courage.
"Yes, it may take the crossbench, it may take a minority government for the government of the day to be forced to do what Australians want."
