Unmistakable Evidence Reveals Unprecedented Hardships for 30-Year-Old Australians in Current Era
Young Australians are facing a tough financial reality, with many barely outearning their ancestors while saddled with much larger student loans and longer repayment periods. A recent analysis of tax return data by the e61 Institute revealed that the average income for 30-year-olds had only increased by six percent from $59,496 in 2012 to $62,987 in 2022, while the average HELP debt spiraled 45 percent, growing from $19,485 to $28,260.
A Decade of Slow Wage Growth and Inflating Education Costs
Research economist Matthew Maltman explained that since the Global Financial Crisis in 2008, the wages of those under 40 have stagnated, growing at a dismal half the rate of older workers. Factors contributing to this sluggish wage growth include a shift towards insecure and lower-paying service jobs, underemployment, award jobs, and an oversupply of workers for high-quality positions.
Older Australians working for longer has also weakened the bargaining power of younger workers, further exacerbating wage stagnation. Other factors affecting wage growth might be increased employer concentration and a decline in job mobility, which Maltman says have hampered young workers' ability to advance in their careers.
Piling on the Debt
Senior research economist Jack Buckley emphasized that young Australians today are taking on more student debt than their predecessors and stretching out the repayment period. In fact, young people are diverting up to 10 percent of their income to HELP debt repayments well into their mid-30s, a critical age when many are trying to save for a home and start a family.
Long-Term Financial Consequences and Government Perspectives
Buckley posits that reducing the financial burden on those with HELP debts could be achieved by extending loan repayment periods. He suggests that, in the long run, the problem might not be the size of HELP debts but rather the timing of repayment.
To alleviate some of the burden, the Albanese government has announced a substantial measure to cut student loans. Starting from June 1, 2025, they plan to wipe off 20 percent of all outstanding student loan debts before indexation is applied (subject to legislation). This initiative is expected to provide relief to over 3 million Australians with HELP and other student loans, with an estimated reduction of $16 billion off the total student debt.
However, it's important to note that most of the benefits of this policy will likely be reaped by a select group of relatively recent graduates who are expected to earn considerably more than the average taxpayer over their lifetimes. Additionally, many will eventually benefit from an inheritance, with the median recipient of a bequest being around 50 years of age.
Brighter Future Ahead?
The report also reveals that the education landscape in Australia has changed significantly. Young Australians today are twice as likely as their parents' generation to hold a university degree, and 80 percent less likely to drop out of school before finishing Year 12.
As the Australian government works on reducing student debt, it's hoped that these measures will ease financial pressures, improve young people's capacity to save and invest, and pave a brighter path for their future economic prospects.
Enrichment Data:
Young Australians today are grappling with larger student debts and extended repayment periods due to increasing education costs, inflation-linked indexation of debt, and slower wage growth. These debts limit their financial flexibility and hamper their capacity to save, invest, or meet essential life milestones.
To alleviate the financial burden, the Australian government has introduced a significant reduction initiative, cutting 20 percent off all outstanding student loan debts. This measure aims to reduce pressure on young Australians and positively impact their economic future.
Learning about personal-finance is crucial for young Australians as they grapple with growing student debts and extended repayment periods. Education-and-self-development resources on managing student loans and navigating the finance landscape could help them make informed decisions and find ways to save and invest.
As the government introduces policies to reduce student debt, such as the recent initiative to wipe off 20 percent of all outstanding student loan debts, it's essential for young Australians to stay updated on the news regarding their financial situation and learn strategies to optimize their financial future.
