How younger Australians are bearing the brunt of interest rate rises and the cost-of-living crisis – while ‘boomers’ and the big banks are getting richer

Younger Australians are being ‘crushed’ by rising interest rates while baby boomers are making money again, a leading real estate agent has claimed.

The Reserve Bank last week raised cash rates for the 13th time in 18 months to a 12-year high of 4.35 percent, leaving many mortgage holders struggling to keep up with their repayments.

It came in the same week as two of Australia’s major banks posted record profits of more than $7 billion each.

Michael Pallier, director of Sydney Sotheby’s International Realty, said the “younger generation is really being hit hard at the moment”.

“It’s not the older generation,” Pallier told 60 Minutes.

‘The older generation benefits because many of them have money in the bank and live off their investments – they have a pay rise. The younger generation is really having a hard time.’

He added: “The poor are being crushed.”

Mr Pallier said he had witnessed many hard-working young people trying to do the right thing and get on the property ladder, only to be left over-indebted and unable to pay their mounting bills.

‘A lot of young people went into the market and listened to the then Governor of the Reserve Bank, who said you’re safe, that interest rates are unlikely to rise for the next two or three years. a good time to enter the market and then rates started to rise,” Mr Pallier said.

‘They are really the victims of this.’

One of those people is 30-year-old Kelly Travers, who works three jobs to avoid defaulting on the loan on her western Sydney apartment.

The elite kayaker, who was representing her native New Zealand and hoping to earn a spot in the Olympics, was forced to make the devastating decision to sell some of her kayaking equipment to free up funds.

“I work, I sleep, I eat and that’s about it,” Ms Travers told the programme.

“It’s not sustainable in the long term, but it’s what I have to do now to pay the bills.”

Despite working three jobs, seven days a week – childcare Monday to Friday and then babysitting and working at a gym on weekends – more than 60 percent of Ms Travers’ income goes towards her mortgage.

“That doesn’t include council rates, that doesn’t include strata, that doesn’t include bills at all,” she said.

“Every day I go to work and the financial stress is so heavy that it honestly makes me cry.”

The latest cash rate increase is expected to add another $200 to her mortgage.

Meanwhile, banks continue to benefit from rapidly rising interest rates.

Last week, NAB posted a cash profit of $7.7 billion, while Westpac gave some of its excess funds to its shareholders after a huge increase in its annual net profit to $7.2 billion.

The Melbourne Cup Day rate hike was aimed at halting rising inflation, with the consumer price index (CPI) rising 5.4 percent in the year to September.

It marked only a small change from the annual pace of 6 percent in the June quarter.

In an ominous sign, the RBA now expects inflation to return to the top of its 2 to 3 percent target at the end of 2025, rather than in June 2025.

“Since the August meeting, the board has received updated information on inflation, the labor market, economic activity and the revised set of forecasts,” Michele Bullock, the Reserve Bank’s new governor, said last week.

“The weight of this information suggests that the risk of inflation remaining high for longer has increased.”

But respected economist and former government economic adviser Stephen Koukoulas said he believed the Reserve Bank had “gone too far”.

“They didn’t need this latest rate hike because the economy is slowing and inflation is falling,” Koukoulas told the program.

‘The RBA’s rate hikes were sufficient before last week’s rate hike. The economy responded to the previous rate hikes, so in a sense they are overprescribing the medicine for a problem that is already being solved.”

Koukoulas, who advised former Prime Minister Julia Gillard and was chief economist for Citibank, warned that the repeated rate hikes could push the economy into recession.

“There is a real risk that the RBA has tightened rates too far and that we are in for a hard landing for the economy,” he said.

“The reason we economists focus on recessions and really hate them is because they cause people economic pain, they cause people to lose their jobs – which is a terrible thing – and they cause businesses to close.”

Mr Koukoulas warned that the risk of a recession is ’50-50′.

Ms Bullock, who became the first woman to become governor of the RBA when she took over the role from Philip Lowe in September, hinted last week that baby boomers are to blame for Australia’s cost of living crisis.

Michele Bullock, herself a boomer, warned inflation would stay “higher for longer” and blamed older Australians as the RBA cash rate rose by a quarter of a percentage point to a 12-year high of 4.35 percent.

She did not mention her generation by name, but had them in her sights as responsible for keeping inflation high, while the 18 percent interest rate of 1989 was now a distant memory for older, post-war Australians.

The contrast was drawn between the young and middle-aged who are paying off a mortgage or struggling with rising rents, and the boomers with large savings and valuable real estate assets.

“The outlook for household consumption also remains uncertain, with many households experiencing painful pressures on their finances, while some benefit from rising house prices, significant savings cushions and higher interest income,” Bullock said.