The cost of living crisis is impacting Gen Z more than Boomers

Mortgage rates are rising, but surprisingly young Australians are suffering the most financially due to the cost of living crisis.

As inflation continues to soar, Finder’s cost of living report found that young Aussies were feeling the crunch the hardest.

Finder surveyed more than a 1000 Australians across age, gender, location and income to get these results.

Chief economist at NAB, Alan Oster, explained that the next year is going to be a difficult time for people financially.

“It might not be a recession, but it will feel recessionary for many people.”

Mr Oster believes that while the cost of living will remain problematic if unemployment rates stay low, that should in turn make the financial times survivable for most people.

“While consumers are stressed about the cost of living, consumers aren’t worried about losing their jobs,” he said. “I don’t think consumers will fundamentally fall over, but I see them changing their behaviours.”

Habit changing makes sense when you consider that Gen Z are very upfront about financial pressures – and more than half feel the need to make more money.

Finder reported that 56 per cent of Gen Z are feeling financially pressured to look for a second job compared to 7 per cent of Baby Boomers.

Similarly, 90 per cent of Generation Z have had to reduce their spending to cope with the cost of living, while only 59 per cent of Baby Boomers have had to make the same financial decisions.

70 per cent of Generation Z also admitted to feeling financially stressed thanks to inflation, while only 29 per cent of Baby Boomers were feeling the same way.

This kind of pressure will create a knock-on effect, experts believe.

Professor of macroeconomics at Sydney University, James Morley, explained that young people will start to make different decisions.

“We are going to see enrolment in education going down.

“I can imagine that we will see young people pull back on lots of discretionary spending,” he explained.

So what will the next 12 months look like financially?

Well, Mr Oster explained: “In Australia, we expect to see a significant slow in activity, which means we have no forecast for growth in our GDP, and we have unemployment starting to pick up but staying pretty low.

“The reason for that is the lags in interest rates, the global economy is still very soft, and outside of Covid and the international financial crisis, it is the worst year since 2000 – when there was a recession.”

However, Mr Oster stresses that we won’t feel the full impact of interest rates for a few more months.

“Most customers are about three months behind what banks have done with interest rates. There will be a financial cliff where people move from paying 3 per cent on their mortgages and move to 5, and that will probably peak in the middle of the year,” he explained.

Basically, things will get worse before they get better, and it isn’t just homeowners that will feel the burn.

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