Go west, Gen Y

 

Casually flicking through real estate listings for outer suburban Sydney, on the way back from an Easter weekend spent in picturesque Tamworth, encouraged the feeling I’d been having the last few days: the desire to move to a regional town.

Tamworth has a population of about 50,000, and its residents have enough of a disposable income that at least ten (by my count) car dealerships exist there. An average family home — three or four bedrooms, in relatively good shape — will cost around $300-400,000. The unemployment rate, at 7%, is not much higher than the national average. If you like country music, so much the better.

Since I’m a born-and-bred city girl, the situation must be rather dire if I’m putting serious thought into packing up and heading out of Sydney.

Low levels of land release and absurdly NIMBY (‘not in my backyard) development approval policies of state and local governments have done plenty to stoke house prices, particularly in Sydney. Historically-low interest rates have been, according to experts, pouring fuel on the flames of already-hot capital city property markets. But low rates also hurt anyone trying to save for that elusive deposit, as returns on bank deposits currently barely outpace inflation.

Last week’s tax discussion paper (chart 4.1, page 60) makes the point that bank deposits are usually the savings method of necessity for those with the lowest ability to pay. Saving the old-fashioned way, as young people do, means copping a hefty tax bill relative to other savings vehicles like owner-occupied housing, housing for investment, superannuation and shares.

On top of that, the government is floating an additional levy on bank deposits (which will be passed down to account holders) and there are no signs of relief from bracket creep for the next six years at least. Weak attempts at getting spending under control leave debt growing, to be paid off by younger generations through higher taxes in the future.

Staring down the barrel of a shrinking pool of after-tax income and no changes to the supply of housing, it just makes sense: go west, Gen Y.

 

Trisha Jha is a Policy Analyst at the Centre for Independent Studies.