The magic amount of money Aussies now need to feel ‘happy’ – and it’s not good news for millions of workers
Young and middle-aged Australians need to earn at least $101,000 to feel happy as economic satisfaction falls to record lows Labor, according to a new study.
The cost of living crisis is creating a new generation gap, with average income earners under the age of 55 feeling even more miserable as they battle rising mortgage repayments or rents.
A wellbeing survey by Australian Unity, Deakin University of 2,000 adults aged 18 to 97 found that those earning less than $100,000 were the least happy.
This is bad news for the 13 million Australians who don’t earn a six-figure salary unless they’re in a relationship with someone who makes good money.
That means a single Australian living alone with an average full-time salary of almost $96,000 would be in emotional as well as financial trouble as a result of the Reserve Bank’s 13 interest rate hikes in 18 months.
But well-being increased in households where residents earned $101,000 to $150,000. Not surprisingly, those earning up to $250,000 or more reported the highest levels of well-being.
Young and middle-aged Australians earning less than six figures are particularly unhappy with life as economic satisfaction falls to a record low under Labor, a new survey shows (stock photo shown)
The Commonwealth Bank has also revealed that baby boomers continue to spend heavily as young people cut back on buying everyday essentials.
Dr. Kate Lycett, a research fellow from Deakin University’s School of Psychology and lead researcher on the Australian Unity Wellbeing Index, said a six-figure income is now the bare minimum for happiness.
‘Anyone from a household with an income of $100,000 or less had personal well-being scores below or at the bottom of the average range,” she said.
‘For households with incomes between $101,000 and $150,000, we are now seeing large increases in personal well-being.”
Happiness increased again when a dual-income couple, or a wealthy individual, earned $151,000 to $250,000.
“When you get back up there, you get an even bigger boost,” Dr. Lycett said.
“What we’re seeing is that money is more important to personal well-being than ever before, as the cost of basic necessities rises.”
Esther Kerr, the CEO of Asset and Capital Markets at Australian Unity said people under the age of 55, in households earning less than six figures, are more likely to experience high inflation and interest rate increases.
‘The findings likely reflect a ‘pressure cooker effect caused by rising costs of living, higher interest rates, persistent inflation and global economic uncertainty,’ she said.
‘This appears to be affecting the financial well-being of people who were previously able to cope or had a savings buffer to get through difficult times.’
In another telling sign, the survey found that satisfaction with the economy was at its lowest level since it began 22 years ago.
Australians are even gloomier now than they were in 2008 during the global financial crisis, with Prime Minister Anthony Albanese seeing a sharp drop in his approval ratings.
Dr. Lycett said tenants and borrowers were both stressed.
“Australians are concerned about the economy and are financially stressed,” she said.
‘Emerging life Fees and interest rates place enormous pressure on many people, especially those with mortgages and those trying to access the housing market.
The cost of living crisis is creating a new generation divide, with people under 55 in particular feeling miserable about their situation as they battle rising mortgage repayments or rents (pictured is a line of potential tenants at Bondi in Sydney)
“Without an increase in economic satisfaction, our national well-being is likely to stagnate.”
The Reserve Bank raised interest rates for the thirteenth time in eighteen months in November, bringing the cash rate to a twelve-year high of 4.35 percent.
The minutes of that meeting, chaired by new Governor Michele Bullock, suggested more rate hikes are likely.
That’s because inflation is now expected to return to the top of the RBA’s two to three percent target by the end of 2025, rather than mid-2025 as recently predicted in August.
“Members noted that the risk that the board’s inflation target would not be met by the end of 2025 had increased and that it was appropriate that monetary policy was adjusted to mitigate this,” the RBA minutes released on Tuesday said.
“They noted that delaying such an adjustment would risk requiring a greater monetary policy response in coming months, especially if inflationary pressures prove stronger than expected.”
Inflation rose at an annual rate of 5.4 percent in September, down from the 32-year high pace of 7.8 percent 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 rising 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 25 to 29 cut spending on household goods by 17 per cent in the year to September, while clothing expenditure has fallen by 10 percent.
Their overall spending fell by 5.1 percent over the year, including a 3.7 percent decline in essentials – the only age group to record a decline in this area.
In another sign of a generational divide, new Commonwealth Bank customer data released on Tuesday showed young Australians aged 25 to 29 were cutting back on essentials (pictured is a Woolworths shopper in the eastern suburbs of Sydney)
In contrast, baby boomers, or people age 65 and older, spent 17 percent more on travel and 11 percent more on dining out, while their overall spending rose 6 percent.
Wade Tubman, head of innovation and analytics at CommBank iQ, says young Australians are having to forgo essentials so they can spend more on entertainment – up 13 per cent over the year.
“We’re seeing consumers in their 20s scaling back their spending, but still leaving room to finance experiences,” he said.
‘We’ve also seen younger people shift their discretionary spending from things like clothes and household goods to cinemas and ticketed events like concerts and sports.’
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 will likely have very little tolerance for an upside surprise,” she said.