Australia’s Treasury secretary has warned that young Australians are increasingly having to rely on the “bank of mum and dad” to get into the property market.
John Fraser said the problem had become so prevalent it was affecting parents’ superannuation decisions, saying they’re now saving later in life to help their children afford their own property.
Appearing before a Senate estimates hearing on Wednesday, Fraser said intergenerational inequality was a “huge issue” in Australia, and a big factor was the amount of wealth in housing.
“This is the circle that we’ve got. Higher house prices, higher wealth, people feel far more comfortable about taking more debt. It’s a worry,” he said.
“The bank of mum and dad ... is becoming more and more prevalent.
“It has impacts on superannuation, where superannuation is going to. It has impacts on why people are saving in their older years to fund their children’s housing needs, not just to purchase but often rents, and it’s a concern.”
He said the problem was a global one, not unique to Australia, but the problem was extreme in global financial centres.
“I was in London recently, at the pub, and the issue’s the same. It’s how much you’ve got to give your kids to get them a start,” Fraser said.
“London is worse than that. You’ve got no hope. I had a son who was over there as a primary school teacher, there’s no way he could have been a primary school teacher in London unless someone was picking up the tab for his rent, and that’s happening more and more.”
Fraser said the policy priority for Australian governments ought to be land release, and the supply of housing generally. He said that would be the best way to reduce price pressures.
Peter Whish-Wilson, Greens’ Treasury spokesman, said the situation would worsen without a serious policy response. He criticised Fraser for failing to provide concrete policy options.
“At least the Treasury secretary did not accept the premise put forward by Bernard Salt that the reason that younger people aren’t buying homes because they are blowing their income on smashed-avocado hipster breakfasts,” Whish-Wilson said.
“Twenty-five-to-34 year olds are less well off than the same age group a decade ago and every other older age group has significantly increased in wealth. He accepted this was true but could only talk in the abstract on how we could address it.
“Investors are using their property-delivered wealth and generous tax concessions to outbid an entire generation who are losing hope at ever being able to own their own home,” Whish-Wilson said.
Earlier this week, the demographer Bernard Salt said in the Australian that millennials could buy their own house if they just stopped going to “hipster cafes” and eating avocado on toast.
He later said he was only speaking metaphorically.
