Low incomes, high costs: young feeling the pain

Younger Australians are bearing the brunt of the cost of living pressures as sharp increases in housing costs and everyday expenses continue to bite.

NAB’s head of behavioural and industry economics Dean Pearson says the ‘wellbeing’ gap reflecting how people feel about their lives has widened.

Younger Australians are bearing the brunt of the cost-of-living crisis, with four in 10 in financial distress.

Lower incomes, little in the way of savings and the struggle to pay a mortgage or rent mean Millennials and members of Generation Z are feeling the pain of inflation more accurately, and it is likely things will only get worse.

More than a third of Australians have experienced financial hardship in the past three months, according to National Australia Bank. Four in 10 young people reported very high levels of distress, more than double that of the over-65s.

NAB’s head of behavioural and industry economics, Dean Pearson, said the “wellbeing” gap reflecting how people feel about their lives had widened, largely as a result of economic conditions.

“Who is it (feeling the gap)? It’s people who are unemployed, it’s low-income earners, and it’s younger people,” Mr Pearson said. “But they also seem to be responding more around how to manage that in terms of being a bit more considered and how they’re spending.”

He said those who owned property felt more secure about their finances than renters.

Working single mum Kim Horsford, 37, is juggling her finances while caring for seven-year-old son Charlie. In January, the rent on her simple apartment in Brisbane’s Wooloowin increased by $50 to $450 a week.

“You just have to juggle,” she said. “I feel like we’re treading water, but it’s going to be long-term rather than short-term.”

She gets by on a carefully planned budget that allows for everyday needs and long-term saving goals.

“I am quite proactive when it comes to money,” she said. “It’s not trying to free up money for going out drinking or avocado toast. It’s extra-curricular activities for Charlie so that he can do swim club and play footy.”

Those with mortgages are trying to limit their exposure to future rate increases. Analysis from finance comparison site Finder shows one in five households with a mortgage hope to refinance in the next six months, equivalent to 594,000 borrowers.

Millennials are the most desperate to refinance, representing a quarter of the group, compared to just 4 per cent of Baby Boomers.

Finder home loan expert Richard Whitten said competitive new-customer rates were providing huge savings given average monthly repayments have increased by more than $1000 following recent rate rises.

“People have borrowed a lot and have really relied on low rates to be able to do that,” he said. “Now all of a sudden you’ve got the fastest rising of rates … in recent history and young people are being slammed.”

Lending data released by the Australian Bureau of Statistics on Friday showed the total value of loans refinanced fell slightly in January but remained close to record highs at $18.6bn.

Inflation may have peaked, but is still running above the decade average and outpacing wages. The Reserve Bank has flagged further action, with economists broadly expecting at least two more rate rises.