Young Australians are not getting the same opportunities to step onto the property ladder as the generations that came before them, the top Treasury official says.

The future for young people was not “bleak” despite the cohort facing “very substantial challenges”, including housing shortages, climate change and sluggish productivity growth casting a shadow over the pace of income gains, Department secretary Steven Kennedy said.

“I’m still optimistic that with the right policy choices, we can, as we have done in the past, leave future generations better off,” he said during a parliamentary hearing on Monday.

Nearly half of all Australians in debt have struggled to make repayments, fresh Australian Securities and Investments Commission research shows.

Cost-of-living pressures, squeezed incomes and unexpected expenses were among the top reasons borrowers were falling behind on payments.

Younger people with mortgages were bearing the brunt of the latest round of interest rate hikes, Dr Kennedy said, but urged caution on the question of intergenerational fairness.

“Older people today would have went through interest rate cycles in the past … younger people today will be the older people of the future and so it goes,” he said.

Dr Kennedy was more worried about the limited supply of dwellings making it difficult to find a property to buy or rent and weighing on affordability.

“Households are taking longer to save for a deposit and more people are renting,” he said.

“Concerted action” was needed to boost housing supply across industry and all levels of government.

Supply chain bottlenecks and the inflated cost of materials and financing stemming from the COVID-19 pandemic were compounding existing structural issues in the housing market that were “complex and had built up over time”.

“They involve all levels of government, as well as industry and community housing suppliers,” Dr Kennedy said in his opening statement.

Migration levels have also become a major political issue in the context of housing affordability.

Net overseas migration boomed after the pandemic as those waiting to work or study arrived in a short period while at the same time departures were slow to lift, largely because lockdowns had disrupted the flow of students completing studies and leaving.

Dr Kennedy admitted Treasury forecasts were well off the mark, with predictions for the year 2022/23 nearly 25 per cent lower than the latest Australian Bureau of Statistics estimate.

“That is frankly, poor performance on our behalf, we simply underestimated how many students would flow back,” he said.

The official defended Australia’s company tax rate as appropriate and supportive of a sustainable federal budget.

At The Australian Financial Review AI Summit last week, Industry Minister Ed Husic suggested corporate tax reform, investment allowances or other incentives should be considered in the context of boosting investment in technology such as robotics and automation.

Dr Kennedy said Australia’s tax system was “not unusual or not particularly uncompetitive” compared to global standards and strong business investment in the country suggested settings were not too restrictive.

“I’m quite comfortable with where Australia’s company tax rate is,” he said.

Finance Minister Katy Gallagher said Australia’s company tax rate was internationally competitive and the government had taken steps to incentivise investment in the budget.

Poppy Johnston
(Australian Associated Press)