Young and middle-aged Australians need to earn at least $101,000 to feel happy as economic satisfaction plunges to a record low under Labor, a new study has revealed.
The cost of living crisis is creating a new generational divide with average-income earners under 55 more miserable as they battle surging mortgage repayments or rent.
An Australian Unity, Deakin University wellbeing study of 2,000 adults – aged from 18 to 97 – found those earning less than $100,000 were the least happy.
This is bad news for the 13million Australians who don’t earn a six-figure salary, unless they are in a relationship with someone earning good money.
That means a single Australian living alone on an average, full-time salary close to $96,000 would be not only struggling emotionally but also financially following the Reserve Bank’s 13 interest rate rises in 18 months.
But wellbeing increased in households where residents earned $101,000 to $150,000. Not surprisingly, those who were earning up to $250,000 or more reported the highest levels of wellbeing.
Young and middle-aged Australians who earn less than six-figures are particularly unhappy with life as economic satisfaction sinks to a record-low under Labor, a new study has revealed (pictured is a stock image)
The Commonwealth Bank has also revealed baby boomers are continuing to spend big as the young cut back on buying everyday essentials.
Dr Kate Lycett, a research fellow from the School of Psychology at Deakin University and lead researcher of the Australian Unity Wellbeing Index, said a six-figure income was now the bare minimum for happiness.
‘Anyone from a household with an income of $100,000 or less had personal wellbeing scores below or at the bottom of the average range,’ she said.
‘In households with incomes from $101,000 to $150,000, we’re now seeing a big increase in personal wellbeing.’
Happiness increased again if a dual-income couple, or a well-off individual, earned $151,000 to $250,000.
‘Once you get above that again, you get an even bigger boost,’ Dr Lycett said.
‘What we’re seeing is that money matters more to personal wellbeing than ever before, as the cost of basic necessities rise.’
Esther Kerr, the chief executive of wealth and capital markets at Australian Unity, said those under 55, in a household earning less than six figures, were more likely to be struggling with high inflation and interest rate rises.
‘The findings likely reflect a ‘pressure cooker’ effect caused by the rising cost of living, higher interest rates, stubborn inflation, and global economic uncertainty,’ she said.
‘This appears to be affecting the financial wellbeing of people who were previously able to cope or had a savings buffer to carry them through tough times.’
In another telling sign, the survey showed satisfaction with the economy at the lowest level since it began 22 years ago.
Australians are now even more downbeat than they were in 2008 during the Global Financial Crisis, which has seen Prime Minister Anthony Albanese suffer a sharp fall in his approval ratings.
Dr Lycett said renters and borrowers were both stressed.
‘Australians are feeling worried about the economy and financially stressed,’ she said.
‘Rising living costs and interest rates are putting immense pressure on many people, particularly those with mortgages and those trying to get into the housing market.
The cost of living crisis is creating a new generational divide with those under 55 particularly miserable about their situation, as they battle surging mortgage repayments or rent (pictured is a queue of prospective tenants at Bondi in Sydney)
‘Without a lift in economic satisfaction, our national wellbeing will likely remain stagnant.’
The Reserve Bank in November raised interest rates for the 13th time in 18 months, taking the cash rate to a 12-year high of 4.35 per cent.
The minutes of that meeting, chaired by new governor Michele Bullock, have suggested more rate rises are likely.
That’s because inflation is now expected to return to the top of the RBA’s two to three per cent target in late 2025, instead of mid-2025 as forecast as recently as August.
‘Members noted that the risk of not achieving the board’s inflation target by the end of 2025 had increased and that it was appropriate that monetary policy should be adjusted to mitigate this,’ the RBA minutes released on Tuesday said.
‘They observed that delaying such an adjustment would create a risk that a larger monetary policy response might be required in coming months, especially if inflation pressures turned out to be stronger than expected.’
Inflation in September rose at an annual pace of 5.4 per cent, down from a 32-year high pace of 7.8 per cent at the end of 2022, following the most aggressive pace of monetary policy tightening since 1989.
But the consumer price index is still too high, with service costs escalating in tandem with rising fuel prices.
In another sign of a generational divide, new Commonwealth Bank customer data released on Tuesday showed young Australians, aged to 25 to 29 slashing spending on household goods by 17 per cent in the year to September, as clothing spending fell by 10 per cent.
Their overall spending fell by 5.1 per cent over the year, including a 3.7 per cent drop in essential items – the only age group to register a decline in this area.
In another sign of a generational divide, new Commonwealth Bank customer data released on Tuesday showed young Australians, aged to 25 to 29, cutting spending on essentials (pictured is a Woolworths shopper in Sydney’s eastern suburbs)
By contrast baby boomers, or those aged 65 and over, spent 17 per cent more on travel and 11 per cent more on eating out, as their overall spending rose by 6 per cent.
Wade Tubman, CommBank iQ’s head of innovation and analytics, said young Australians were going without essentials sop they could spend more on entertainment – which increased by 13 per cent over the year.
‘We’re seeing consumers in their twenties cut back spending but still leave room to fund experiences,’ he said.
‘We’ve also seen younger people redirecting discretionary spending from things like clothes and homewares, to spend on cinemas and ticketed events such as concerts and sport.’
Commonwealth Bank senior economist Belinda Allen said another RBA rate hike in February was possible, if inflation remained high in the December quarter.
‘The board is likely to have very little tolerance for an upside surprise,’ she said.