Parental concern: Many parents are likely to contribute to university fees to ensure their children do not accrue large debts before they start work. Photo: Glen HuntJoe Hockey’s first budget has shifted economic risk to parents.
Take the requirement for those aged under 30 to be ”earning or learning”. From the start of next year unemployed young people wanting to go on the dole will be forced to wait six months before they receive any money. After that a job-seeker will have to work for the dole for another six months before income support ceases again if the person still does not have a job. That means unemployed young people will theoretically lose payments for six months of every year, although there are exceptions.
What will most unemployed young people do? Rely on their parents for accommodation and all other costs.
Last year the median duration of unemployment for a job-seeker was 17 weeks. But the wait can be much longer for the unskilled.
The new rules are likely to hit unskilled young people from low-income families the hardest. And what happens to under-30s who can’t rely on their parents for support? Homelessness?
But parents higher up the income scale will also be affected, especially those with children making the transition from university to the jobs market.
It often takes new graduates some time to find a job that uses their university training. In 2013 one in every 10 graduates was not in full-time employment three years after leaving university, research released by Graduate Careers Australia last week shows. The prospect of a long period without income might discourage graduates from an extended job search and push some to settle for less appropriate jobs, maybe part-time.
Another budget change set to put more financial pressure on parents is the deregulation of university fees. While the cost of some courses might fall, this change is likely to make studying at popular, big-name city universities more expensive. The budget also revealed higher interest rates would be charged on loans provided by the federal government.
While all students will be entitled to federal student loans many parents are likely to contribute to university fees to ensure their children do not accrue large debts before they start work. Parental concern about their children having debts has been stoked by high house prices, especially the large deposits needed to get a stake in the property market.
Economic change over the past 30 years has increased the financial risk borne by households. While reforms have made Australians wealthier and more productive, one spin-off is a more financially exposed household sector.
This is the case in most advanced countries – nearly a decade ago the IMF warned the household sector ”has increasingly and more directly become the shock absorbers of last resort in the financial system”.
This week’s budget makes it more likely parents with adult children will need to be that shock absorber.
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