Younger Australians Bear Brunt of Rising Interest Rates

1

While older Australians have enjoyed financial stability, younger generations are struggling, primarily due to recent monetary policies. The CBA’s assessment shows that younger people, largely homeowners with mortgages, are facing increasing financial burdens.

Data indicates a significant decrease in home ownership rates among younger Australians, whereas older age groups maintain stable ownership rates. While anticipated by some, this information paints a clear picture of how economic strategies implemented by the Reserve Bank of Australia (RBA) have selectively impacted different age groups.

The purpose behind the RBA's significant interest rate hikes was to specifically target individuals with mortgages—a group predominantly consisting of younger households. In the words of a CBA analyst, "RBA’s monetary tightening was intentionally designed to curb spending by affecting mortgage holders.”

Your typical Australian with a mortgage today will pay about 50% more in monthly repayments than they did before these rate hikes began. This surge has significantly reduced their available disposable income, presenting a pressing financial challenge.

Conversely, older Australians, many of whom possess substantial savings, have benefited from increased interest on their deposits, effectively increasing their disposable income. This has permitted a marked difference in available financial resources between the generations.

Adding to the financial pressures on younger Australians is the considerable rise in rental costs. Although rentals have skyrocketed, the RBA's monetary strategy has played a minor role. Instead, these increases are largely propelled by unprecedented immigration levels, a move driven by the federal government.

In fact, older generations remain largely insulated from these rental surges, boasting a home ownership rate of approximately 80%. This high ownership rate means older Australians are less vulnerable to rent fluctuations, further highlighting the economic disparities.

While the RBA's tactics are achieving their goal of dampening overall demand by reducing disposable income among mortgage-heavy, younger Australians, they also expose an intergenerational inequity. Critics argue the current approach is lopsided, exacerbating financial difficulties for the young without adequately addressing broader inflationary pressures.

The pressing issue lies in the absence of federal government intervention to distribute financial challenges more equitably across generational lines. By embarking on its most ambitious immigration strategy to date, the government has unintentionally compounded the hardships faced by young Australians by driving both property prices and rents upwards.

The CBA study serves as a reminder of the growing economic gulf between the young and old, urging policymakers to consider a more balanced approach that addresses this generational divide with an equitable sharing of economic challenges.

Published:Friday, 22nd Nov 2024
Source: Paige Estritori

Share this news item:

Finance News

Clear

Increasing Number of Qualified Financial Advisers Opt Out of Practice 11 Jul 2025: Paige Estritori Recent analysis from WealthData indicates a growing trend among financial advisers in Australia, where a significant portion of those who have successfully passed the financial adviser exam are opting not to practice. As of now, 5,096 individuals, representing 33.31% of active advisers, have chosen not to proceed into practice after passing the exam—up from 28.36% a year prior. - read more

Melbourne's Housing Market: A Prime Opportunity For Buyers 11 Jul 2025: Paige Estritori The Reserve Bank of Australia (RBA) recently surprised many by maintaining the interest rate at 3.85%, against expectations of a cut. This decision is seen as a measure to continue moderating inflation, but it simultaneously delays potential spikes in the housing market, providing a favorable window for prospective homebuyers. In particular, Melbourne's current market presents significant value, offering a promising opportunity for those looking to enter the property market. - read more

Improving EOFY Planning: The Call for ATO Portal Access for Advisers 09 Jul 2025: Paige Estritori In a recent discussion, James O'Reilly, Director and Financial Planner at Northeast Wealth, underscored the benefits that could come from granting financial advisers access to the Australian Taxation Office (ATO) portal. Speaking on The ifa Show, O'Reilly proposed that this access would significantly simplify the services financial advisers provide to clients, particularly at tax time and the end of the financial year (EOFY). - read more

RBA Holds Rates Steady, Shocking Markets and Shifting Economic Expectations 09 Jul 2025: Paige Estritori The Reserve Bank of Australia (RBA) has decided to keep the official cash rate steady at 3.85%, taking many by surprise after expectations of a 25-basis-point cut had built up in financial circles. This unexpected move comes amid recent data indicating easing inflation and weaker than anticipated economic growth, conflicting with prior predictions of a cut. - read more

RBA to Continue Interest Rate Cuts Amid High Unemployment 08 Jul 2025: Paige Estritori The Reserve Bank of Australia (RBA) is anticipated to maintain its trajectory of incremental interest rate reductions, according to insights from leading financial analysts at ANZ. Recent data from the ANZ-Indeed Australian Job Ads series revealed a rise from 114.8 in May to 116.9 in June, suggesting a potential rebound in job advertisements after previous declines. Despite a stable unemployment rate and hours-based underutilisation rate since mid-2024, the Australian labour market remains strained. - read more