Wage Stagnation’s Impact on Young Australians’ Homeownership Dreams

Australians are grappling with the lingering effects of a decade marked by severe wage stagnation, according to research from the Per Capita think-tank. The report reveals that the average yearly wage is nearly $12,000 lower today than it would have been if wage growth had adhered to historical averages between 2012 and 2022.

This prolonged period of wage suppression has not only affected workers’ earnings but has also significantly contributed to the current housing crisis. Particularly impacted are Millennials and Gen Z workers, who faced diminished financial prospects during the crucial early years of their careers. This stagnation has hindered their ability to save for a home deposit and reduced their borrowing capacity with banks.

Emma Dawson, executive director of Per Capita, highlights the stark reality for first home buyers in Australia: “Data from the country’s major banks indicates that the typical first home buyer is a couple in their mid-30s borrowing just under $500,000. Had they experienced the same wage growth as their parents did early in their careers, they would have earned an additional $54,000 each over the Lost Decade. Together, that amount would have sufficed for a 20 percent deposit on their first home today.”

The forthcoming report, titled The Lost Decade: How Low Wage Growth Stopped Young Australians Buying a Home, details how the consequences of wage stagnation are often underestimated. Per Capita argues that this wage suppression, coupled with a landscape of low interest rates, inadequate investment in affordable housing, decreased construction rates, tax incentives favoring property speculation, and rapid population growth, has severely limited the ability of Millennials and Gen Z to save for homeownership.

The report emphasizes that while homeownership has always been a challenge for working and middle-class Australians, the current generation faces unprecedented obstacles. It notes that the traditional pathway to homeownership—saving for a 10 to 20 percent deposit on a modest home and securing a 25-year mortgage—has become increasingly unattainable.

As the housing market continues to evolve, the findings from Per Capita serve as a call to action, urging policymakers to address the deep-rooted issues in wage growth and housing affordability, which are crucial for securing a stable future for young Australians.