Author: Mark Coultan
Date: November 7, 2007
Publication: Sydney Morning Herald
It's an integral part of being a parent: you make sacrifices to give your children the best chance to succeed in life. And there is an expectation that each succeeding generation will take those chances and be happier, better educated and better off. But university education delays entry to the workforce, which could account for the relative drop in income that Morgan found for this age group. Even here baby boomers are breaking the mould. Where once people in middle age had paid off their mortgages, these days paying off the mortgage is a reason to borrow more, for extensions, an investment property or shares.
But what if the behavior of one generation - however inadvertent - caused a new generation to be worse off?
What if today's young adults, the so-called generation Y, were finding it tougher than their predecessors, generation X, while at the same time baby boomers grew ever richer, using their wealth to lock their children out of the housing market?
That is exactly what appears to be happening. Not only are people under 30 earning less (in relative terms) than generation Xers did when they were the same age, astronomical prices mean they are increasingly locked out of home ownership. They are in danger of becoming the renting generation.
(There is no clear definition of the label, but generation Y is vaguely used to define those born in the 1980s and '90s. Baby boomers are those born between the Second World War and 1961 (sometimes 1964) and Generation X is the period in between.)
Every week Roy Morgan Research knocks on Australians' doors and asks questions.
Apart from the well-known questions about who those surveyed would vote for, the researchers ask a host of other questions: which bank they use, how big is their mortgage, how much superannuation do they have?
They have been doing so for years, and not just in Australia. They also collect data from the United States, Britain, New Zealand and, in recent years, Indonesia. The result is a treasure-trove of information about the way Australians think and behave, both over time and in comparison with people overseas.
The researchers have now decided to bring some of this information together to provide a more accurate picture of trends over a 10-year period.
Their first report, State of the Nation, focuses on housing affordability. Right in the middle of an election campaign in which interest rates are a big issue, and with the Reserve Bank tipped to raise rates again this week, it is very timely.
The data draws a disturbing picture of Australians under 30 (which, for the purposes of this story, we will call generation Y). This generation is doing exactly what everybody says is the right thing: they are getting a good education.
More Australians than ever are gaining university degrees; up from 15 per cent 10 years ago to 23 per cent today.
While the average income of all Australians has increased by more than half in the past eight years, the income of Australians under 30 has only increased by about 40 per cent. People over 60 had the greatest rise, with an increase of more than 60 per cent, reflecting people staying longer in the workforce and the power of their investment income.
While increased education among younger people is undoubtedly a good thing, and normally considered a key to increasing income over a lifetime, Morgan speculates that there may be less of an income premium attached to higher education than previously, because the graduates are competing against each other for jobs.
It notes that while part-time and casual work has increased across all age groups, it was most pronounced among the under-30s. That makes sense for people who are still studying, but it may also reflect, says Morgan, "increased difficulty in finding stable, long-term employment."
While their income (relative to everybody else's income) has declined, at the same time house prices have skyrocketed.
Morgan finds that the value of the average mortgaged home has increase from $170,000 in 1997 to $434,000. But the value of a home owned by someone under 30 has not increased by as much as homes owned by older people, suggesting generation Y has had to settle for properties of relatively lower value to get into the market.
And while they are buying cheaper houses, they are borrowing more. Those who have stretched themselves to buy a home owe, on average, more than $200,000. Generation Xers owe $179,000 and baby boomers owe $128,000.
The equity that people own in their homes increases as they age, but the 10-year trend shows while young people own about the same proportion of their home as they did 10 years ago, older age groups have benefitted from house price inflation to gain a larger share of their homes.
Meanwhile, baby boomers continue to strengthen their grip on society, even as they age. Ten years ago those aged 45 to 59 owned about a third of the money in bank deposits, managed investments and superannuation. Today they own 42.6 per cent of those assets.
But generation X has the most debt. Thirty to 44-year-olds, who represent 27 per cent of the population, have 46.7 per cent of the credit card and loan debt.
Today almost half (49 per cent) of boomers have a home loan, while 10 years ago just over a third of people aged from 45 to 59 did. Even seniors have not kicked the debt habit, with the proportion of the over-60s who still have not paid off the mortgage almost doubling to 9 per cent.
But the story is not just about one generation using its purchasing power to elbow a younger one out of the market.
While members of generation Y have less money than their predecessors, they like to spend it. In many ways, today's young people have more in common with the baby boomers than with the generation between them.
In fact, some commentators have dubbed them the echo boomers. Perhaps living in a period of low unemployment has given them a similar outlook on life to those who grew up in the full-employment 1960s, when a job would be waiting after the obligatory overseas adventure.
But there are few hints of a counter-culture among today's young adults. More than half of the under-30s agree with the statement "I enjoy clothes shopping," and more than a quarter agree with the statement "I was born to shop". Almost as many would eat out every night, if they could afford it.
Not surprisingly, they are much more likely than their elders to go to the cinema, eat out, go to a nightclub, buy fast food, go to a pub or even visit a music store.
They like to spend their money on travel and technology, particularly mobile phones, which will come as no surprise to anyone, especially the phone companies, which are making lots of money out of them.
The Morgan research finds that 91 per cent of the under-30s have mobile phones (perhaps the more surprising finding is that 9 per cent of them do not) and that they spend $54 a month on them, compared with $45 for 30- to 44-year-olds.
They also like to buy computers, and plasma and LCD televisions. And travel.
In this respect generation Y is more like the baby boomers when they were in the bloom of their youth. In fact, today's young want to do what their parents did in the 1960s: leave the country.
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