By now it should be no surprise that young Australians are doing it tough. In the post-Covid era, as the cost-of-living crisis tightens its grip on the nation, intergenerational wealth inequality has significantly worsened, and today’s young Australians are now poised to be the first generation worse off than their parents.
A recent study into the spending habits of young people confirms how stark the divide has become. The CommBank iQ Cost of Living Insights report reveals Australians in their mid-to-late 20s have dramatically cut back their spending compared with last year – far more than any other age group. Meanwhile, those over 65 are spending at rates surpassing inflation on travel, retail and eating out, cutting back only on charitable donations.
This economic disparity is now well-documented. Last year, both qualitative and quantitative evidence showed young people were not only forgoing discretionary items such as dining out or concerts but also cutting back on essentials such as food, fuel, utilities and insurance. Many younger Australians have also taken more financial actions to rein in spending such as negotiating bills and postponing major purchases.
According to the CommBank report, those aged 25-29 have reduced spending even further, making them the only age group to cut back on both essentials and non-essentials. The repeated cutting back on essentials reflects a reduction in quality of life for young Australians, indicating they are at risk of a poorer future.
This trend seems to be a compounding one, with the RBA’s policies to curb inflation by lifting interest rates punishing younger people, while allowing older people to enjoy higher asset values and bigger returns on savings. It’s not surprising then that older Australians are able to spend above the inflation rate, thereby counteracting efforts to cool the economy and further disadvantaging younger generations.
What makes this economic disparity particularly damning is that it is not the only front where young people are getting the short end of the stick. Yes, all generations feel some economic pain in the early years of their work life but what sets today’s youth apart is the cumulative effect of multiple crises.
Late millennials and early Gen Z were significantly affected by Covid during their formative years. It is the same cohort that entered and competed in a crippled job market filled with insecure work and disposable labour, a welfare system designed to maintain low wages and a housing system aimed at generating income for investors and landlords rather than providing affordable housing.
This has stretched their transition to adulthood, delaying important markers like a stable job, home and family. They are ‘younger for longer’ – shallow in resources and in prospects.
Continuous stress during impressionable years (18-29) can have a lasting impact, shaping the social and political outlook of a generation.
And the negative effects go beyond finances. A widening intergenerational wealth gap may affect the ambitions, aspirations and wellbeing of future generations. In the UK last year two-thirds of 18-24-year-olds had lowered their career expectations, while in Australia a similar amount abandoned dreams and ambitions due to the cost-of-living crisis and mental health concerns.
Changes in financial stress are closely linked to life satisfaction, psychological distress and confidence in the country’s direction. This year’s leap in money-related stress coincides with a decline in confidence in the government and a drop in overall satisfaction with the direction of the country, an ANU study found. The most dramatic sentiment change was in the proportion of Australians who believed owning a home was part of the Australian way of life. The national average dropped from 74.9% in April 2017 to 65.8% in January 2024. The youngest age group, 18-24, saw the greatest decline (from 62.2% to 49.5%), and those aged 25-34 also saw a similar significant drop (from 64.6% to 52.4%).
If such feelings and attitudes persist – especially as young people are gradually priced out of the housing market and struggle to find secure, affordable housing – we will see inequality-driven social cleavages destabilising society and politics for years to come. We are at a risk of a generation that permanently thinks and acts as though the system is rigged against them.
Continuous financial stress and inequitable handling are robbing young people of a fair chance, an equal opportunity – a fair go. These setbacks make it much harder for young people to secure a future – something their parents did not have to struggle as long to achieve.
Young Australians are struggling but improving their lives doesn’t have to come at the expense of older generations. Thinking of it as a finite pie will only fuel intergenerational hostility and further threaten the intergenerational bargain.
Dr Intifar Chowdhury is a youth researcher and a lecturer in government at Flinders University
