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It’s as much Smashing Pumpkins as smashed avocado

(This article is republished by Morningstar from our archives).

There is no greater accolade for a social commentator than having an idea enter the national lexicon. So it was with due pride that demographer Bernard Salt showed his unmitigated delight at the way his 'smashed avocado' reference now sums up an entire generation of Millennials and their spending habits. Salt was speaking at a Colonial First State Global Asset Management Forum on 1 May 2018, and he explained how media companies from all over the world have contacted him to discuss his smashed avos.

Salt’s reference to $22 avocado on toast for breakfast in the original article in The Australian has become a touchpoint on housing affordability and even intergenerational conflict. He said of young people:

“Shouldn't they be economising by eating at home? How often are they eating out? Twenty-two dollars several times a week could go towards a deposit on a house.”

However, at the panel discussion, he said the real purpose of the column was misunderstood, as he subsequently wrote:

“It was intended not as a criticism of youth but as a parody of middle-aged moralisers, using the setting of a hipster cafe to showcase the conservatism of middle-aged thinking.”

The mistaken message has more merit

Notwithstanding most people mistaking the original interpretation, the incorrect meaning surely carries more gravitas. This struck me while attending a concert at the ICC Sydney Theatre a few days after hearing him speak. It was the highlights from the BBC series, Planet Earth II, ‘live in concert’ with the Sydney Symphony Orchestra playing an original score to match the action. The theatre holds about 9,000 people, and the only empty seats were the cheap ‘bronze’ sections at the side.

Now here’s the thing. The audience was overwhelmingly young people, say under 30, and most of the tickets were in the ‘platinum’ and ‘gold’ categories. The ticket tiers are shown in the extract. With mediocre wine in a plastic cup at $10 a pop, many young couples were up for $400, and the ‘BBC Earth Lounge’ was full at $1,000 a couple. People queued impatiently to buy drinks and chips while the free water sat unloved.

For what? It was a great show, but BBC nature documentaries and David Attenborough are at saturation levels on free-to-air and pay television. They can be watched for free online 24/7. Most people have big flat screens and good sound systems, and could watch the animals with great sound any night of the week. This was not a once-in-a-lifetime chance to see a music legend. It was a good night out watching something readily available, acknowledging that the SSO made it extra special.

Smashing Pumpkins 30th anniversary tour

In a couple of months, the legendary band Smashing Pumpkins will start a 30th anniversary reunion tour in the United States, the first time most of the band has toured together in almost 20 years. The band has a big Australian following, and if the tour makes it here, they will sell out at an average of $200 a ticket.

In 2013, Pink sold out 46 concerts for over 600,000 fans, with the cheapest seats at $150 and the ‘True Love’ package of meaningless stuff at $400. Justin Bieber’s recent VIP experience was over $500. Adele sold 200,000 tickets for two open-air Sydney concerts in 2017 with D Reserve, up in the heavens at the ANZ Stadium, costing over $100, and A Reserve nearer the stage at over $300. Ed Sheeran’s 2018 Australian tour sold over 1 million tickets with 225,000 in three shows in Sydney, slightly more than AC/DC in 2010.

The list is endless, week after week, worth billions a year, and Australia can’t get enough of it.

What do some young people earn?

Clearly, many young people are well-paid and $400 is the cost of a decent night out, but it is common to read young journalists bemoan their inability to ever buy a house in Sydney or Melbourne. The gig economy is making more jobs part-time and removing job security and benefits. Many struggle to make rental payments, never mind borrowing half a million.

Writing in The Sydney Morning Herald on 7 May 2018, a Fairfax contributor, 27-year-old Joshua Dabelstein said he does not know anybody who has ever considered buying property. He said his generation is more concerned with paying the rent.

“A friend of mine’s boss convinced her that paying $17 per hour at a café was a great deal because she wouldn’t have to pay tax on it … In the past 48 hours, two close friends have been fired. One has spent seven months working for a restaurant that paid him a flat rate of $19 an hour.”

So without entering the debate on what’s fair and whether small business can afford to pay penalty rates, there are vast numbers of young people earning less than $20 an hour. Perhaps these are not the people going to many concerts, but when Ed Sheeran sells one million tickets and Pink and Adele sell 600,000, there are a lot of gig economy and casual workers among the audience.

What do banks now require for a home loan?

In the last year, qualifying for a home loan has changed dramatically. Lenders want to know far more details than they did at the start of the residential property boom that has now ended. The Financial Services Royal Commission produced much evidence in Round 1 on how easy it was to obtain finance. Now, lenders want to know about day-to-day living expenses, down to details such as how much is spent on fuel, eating out and, yes, going to movies and concerts. There is more checking of bank statements by line item, and reports of lenders asking why borrowers needed luxury items like gym memberships. The Royal Commission’s honing in on responsible lending obligations has changed mortgage industry procedures. ANZ Bank CEO Shayne Elliott said the more risk-averse mood would make it harder for some consumers to borrow for a home.

The investment bank UBS has done an estimate of how borrowing conditions have changed, as shown below, with a decline in loan size for given levels of household income, and lower loan-to-income ratios based on new lending scenarios.

Following the Royal Commission, much larger deposits will be required, and most people will only achieve this by reducing their spending or going to the Bank of Mum and Dad.

What could be achieved by smashing the concert desire?

Life is for living and café breakfasts and concerts are fun and part of the joy of an Australian way of life. I get that. But for the sake of the exercise, let’s see what could be achieved by salary sacrificing into superannuation instead of buying a $200 concert ticket (or finding some other saving) each month.

These calculations are made using ASIC’s MoneySmart Superannuation Calculator where anyone can experiment with the numbers. Check the website for the underlying assumptions but this example uses the following:

  • Age at start, 20
  • Annual income before tax and super, $40,000
  • Desired retirement age, 67
  • Employer contributions, 9.5%
  • Low-Medium fund with fee of 0.9% pa plus $50 pa admin fee
  • Growth fund with investment return of 5% pa.

The estimated fund balance at age 67 is $221,546. Of course, investments markets do not deliver smooth, predictable results as this chart implies, but it's an ASIC-approved picture of long-term potential.

Now let’s change only one assumption, with the saver making additional salary sacrifice contributions to superannuation of $200 a month. All numbers are adjusted for inflation.

The balance at age 67 is now $370,657, an increase of about $150,000 or nearly 70%.

Sacrifices are needed

It doesn’t matter whether the $200 a month comes from missing a concert or avocado on toast, the numbers show the remarkable impact of disciplined saving and a relatively modest amount extra each month. Of course, many people would struggle to find $50 a week, but missing a coffee a day would go half way there. It’s a matter of lifestyle and future financial security at the cost of current consumption and enjoyment.

Seeing Smashing Pumpkins, Pink, Justin Bieber and animals on a big screen are all fun to somebody, but having financial security at age 67 is fun for everybody. Bernard Salt was right when he wrote that saving all the little extras for many years could go towards a home deposit or a decent retirement.

If his original article was a “parody of middle-aged moralisers”, the queue starts here.


Graham Hand is Managing Editor of Firstlinks.


Peter C
May 25, 2018

To Gen Y who wrote on 11 May. You are incorrect with your timing on negative gearing, it has been available to use since 1936.

It is just that it has not been fashionable until about the 20 years or so because traditionally property in Australia only rose about 1% p.a. above the rate of inflation. Therefore in times of low inflation (such as the 1960's) it was pointless losing money negatively gearing property because you would never make up for the loss with capital gains. It is only since about 1997 that property prices have exploded ahead of household income.

Also, prior to 1985 there was no capital gains, so effectively, as long as you held for 12 months with the intention of income (e.g rent) not just profit, you got 100% discount on the capital gain, so although an issue, I doubt it is as big an issue as you believe.

The real reason why property has become un-affordable particularly in Melbourne and Sydney is the explosion of cheap and easy debt. There is good research that shows if you allow people to borrow more, they will spend more on the goods/services they are after. It is just another example of irrational human behaviour but that is who we are..

The solution to the property price problem which will give millenials a chance, is to ration debt, i.e limit the total amount you can borrow to 80% of the property's value.

By that I mean you cannot borrow the deposit from another source, e.g deposit bond, family members or against equity in another property. A deposit should be a deposit, not another loan.

I doubt any politician would agree to this proposal because they all see ever increasing property prices as a good thing, even if it is because of ever increasing debt.

Unless this changes, most millenials will be destined to rent the rest of their lives (or at least until they inherit their parents home at about the age of 63).

May 12, 2018

When I first gave my daughter pocket money at age 8, and told her to treat herself, she said no, I'll save it to buy a house. She bought an apartment in 2012 at the age of 23 for $430,000, admittedly with $100,000 help from us. That place is now worth maybe $750,000 and she's now 30 and looking for a house for about $1.2 million. It's mainly because she was so careful with her money all her life.

Gen Y
May 18, 2018

She needed $100k help from the bank of mum and dad! Would have she got there without wealthy parents?

May 21, 2018

Answer = no, because even if it was a loan to pay back, it still provided the assistance to get into the market. And I doubt any loan from parents would be done on bank terms with a threat to foreclose if you didn't make your payments.

The logic of the boomers seems to be that Gen Y all have rich parents, because they themselves are. If they are wealthy, "it's because of them", otherwise, "it's luck" is their attitude

Baby Boomer
May 12, 2018

My main point re GenY attitudes is that, lacking any comprehension of economic or financial adversity and not interested in putting a bit aside for a rainy day/cold winter,let alone a deposit on an appreciating asset (other than forced by legislation re super), they seem content to consume rapidly depreciating assets.

Baby Boomer
May 12, 2018

You are absolutely right about this lot. They have never known economic hardship and so they cannot conceive things could be different. They also assume if something ever went astray,they rationalise either Mum or Dad or the government will step in.

Our parents survived a world war and a Depression which was seared into their souls;being thrifty,prudent and working hard wasn't an option.
Our generation had some of that passed on to us,including saving habits so that after a bit of self-denial we could buy a clapped out used car; a bookcase was a couple of planks of timber between bricks.Curtains were spare sheets and blankets.
Guys I know walked an extra train station or took a shorter bus,so they could have a beer so the week's budget could remain intact.Those who had to wear suits might have had two, rather threadbare ones and one pair of work shoes.A real extravagance was saving for a stereo player, and then a couple years saving for deposit on a 3 bedroom brick veneer house,well out in the burbs.
If you suggest this generation might be happy to take some of your still good furniture or the slightly dated but efficiently working family car ,possibly when they start thinking of leaving home (after free board and supported education until their mid 20s),you are looked at with utter disdain.
As for putting aside some money for a deposit by giving up their annual holiday,usually extended and featuring Europe or South America ,not eating out unless from Mum or having a group hens night or bucks party in Hawaii or Thailand, or the engagement ring could be anything less than the size of Uluru,again the disdain is equally tangible.

GenY's bleat about the unfairness if the tax system- the reason why we over-invest in housing is that the overall tax take is too high for those who do put in an effort and want to feel they have created some wealth for their effort.If he wants all property to be put under a capital gains tax regime (and especially if Shorten wants to increase the impost),people will simply under invest in property.But equally critically,the tax take from other sources would have to fall not to do significant economic damage.
I am pretty sure NZ doesn't even have a capital gains tax and people have survived.

Peter Cornell
May 12, 2018

The one thing not mentioned is that the Federal Government immigration policy has resulted in Sydney swelling in size by 2 million people in the past 20-25 years.

Gen Y
May 11, 2018

Beetoota must be a fan of Cuffelinks.

May 11, 2018

"There are many windfalls that come along the way too. Redundancy payouts, better paying jobs as a career develops, marriage and inheritance, which will ultimately add to your savings if managed prudently."

But you can't, and shouldn't rely on that.

The first, I've been fortunate never to have.

The second is hard won and not guaranteed, despite putting a lot of effort into a career, you don't necessarily get recognised and rewarded for what you put's not a linear equation.

The third, I married for love, not money, and her family aren't rich. Neither are mine.

The fourth, I don't expect anything from my parents. I'd sooner make my own way to wealth, which I am doing a pretty good job of.

May 11, 2018

Well, try being a Gen-X (when most of the bands and musicians you used to love are retiring or have died) with kids, school fees / childcare and a mortgage.

There's no money or time for concert tickets or breakfasts / dinners out. Seriously, if I get to one gig a YEAR, I'm doing well. I've said "no" to my favourite bands, even at a "relatively cheap" $150 a ticket, let alone the fact that they don't play all the cities in Australia and so, getting to, from the gig includes accommodation and flights to SYD or MEL, making it more like $600 for a night out.

No thanks. And putting that much money into super when you are younger and the goalposts are changing so much ? Good luck with that, would sooner invest it outside of superannuation into the sharemarket or pay my mortgage off faster.

May 11, 2018

It has always been hard to get into home ownership. Each generation says it was easier for the generation before. I remember feeling overwhelmed as a 20 something in the early 1990's about how to get into the housing market and build wealth generally.

So I knuckled down and redirected my car repayments towards a deposit when that loan was paid off. It was a modest car too, not a European luxury branded one. I went without a phone and laptop (probably not possible today), cooked at home 6 out of 7 nights/days a week, shopped my wardrobe rather than buying new clothes, shoes and handbags, holidayed less, and socialised a lot but inexpensively. Also when I did buy, I bought a studio apartment in the eastern suburbs of Sydney. I did not expect to buy in at the same level as my parents' home ownership journey.

That studio is long gone, but it was a stepping stone to greater things.

I also married a man with a similarly prudent financial outlook to my own. It is crucial to choose well in marriage. As my grandmother used to say, "Love flies out the window when money flows out the door."

The thing is, the only way to fix the problem of feeling locked out of the property market is to start saving now. Spending your entire income plus more and paying interest on that, will definitely not get you into home ownership. Cutting spending and beginning saving today ultimately will.

There are many windfalls that come along the way too. Redundancy payouts, better paying jobs as a career develops, marriage and inheritance, which will ultimately add to your savings if managed prudently.

What millennials begrudge is the wealth of baby boomers and Gen Xers. Bill Shorten's politics of envy does not help either. But they fail to understand how simply it can be attained. Any mug, even on a low income, can attain great wealth if they are disciplined enough to harness the magic of compound interest as evidenced in your graphs above. "Little and often" has the power to transport a person to great wealth. It is that simple. The keys are starting early and being disciplined to contribute to your savings pot regularly. It's not rocket science but it will happen. It's a shame most of us understand this way too late, if ever.

Gen Y
May 11, 2018

It’s a shame Cuffelinks has turned into into a wealthy, conservative baby boomer rant against the younger generations. Given the budget was more than kind to the boomers this year, cufflelinks will likely be short of material for the next few months.

As Gary M calls out, most people are bad with money, they spend what they earn (plus whatever credit card limit the bank will give them)... this isn’t a Gen Y problem, it’s a societal problem.

The fact that just saving for even just a deposit for a half decent house reasonably close to work is so unattainable can’t be blamed on some expensive concert tickets or breakfasts, but the fact that there are gross inequities in our tax system and politicians priorities which Favour property speculators over those who wish to buy a home to raise their family in.

SMSF Trustee
May 11, 2018

So you'd rather have capital gains tax on the family home, Gen Y?

Because that's a far bigger tax break in favour of 'those who wish to buy a home to raise their family in' than anything that the alleged property speculators get. Let's see, on my weekender I not only would pay capital gains tax if I sold it, but I've paid land tax every year for two decades, increasing whenever the value of the property goes up, which I have to pay for from after-tax dollars from other income because it's a tax that's unrelated to any income or cash flow I derive from the property. It's an insane unfair tax.

I'm all in favour of the younger generations getting on in life, but you're yet to explain to us without preconceived biases of your own how policy or anything else prevents that from happening. You just keep giving us whinges and complaints.

As for what Eddie has said, doesn't it actually confirm the point that Graham is making? If buying your own home is your priority, then you'll save for it. You'll prioritise it and make it happen. You can't complain that it's not affordable and spend $200 a week on other things that are the luxuries of your generation. Eddie's saying that this isn't where young people are at - in which case they are simply showing that they don't prioritise owning a home.

Prioritising is what we did 30-40 years ago, by the way. My wife and I slept on the floor for the first year or so after buying our first home in 1981 because it took all our money to get the house. That's the sort of thing we expect to see from you and your generation first and foremost, not expect policy changes to hand it to you on a platter.

It's what my son is doing now, by the way and he's in your generation. Rolling up his sleeves and getting on with it - and without any funding from the bank of mum and dad as well. I'm proud of him.

Gen Y
May 11, 2018

Of course I don't believe in CGT for the family home. This would only discourage downsizing even more than it does today. CGT free family home is a fair policy to help support people having a home to live in and upsize/downsize when necessary to reduce the cost of changeover. Given interest costs are not tax deductible also makes it fair that there's no CGT.

There's plenty of policies that could help swing the pendulum in favour of the home-owner, rather than the investor:
- Removal of Negative Gearing.
- Removal or reduction in CGT discount.
- Removal of LRBA in SMSF.
- Not allowing non-permanent residents to purchase property.

All of the above are policies that have come in place in the last 20-30 years. They've supported investors during a period where housing has become grossly unaffordable. The main purpose of housing should be to provide people with places to live, be a part of a community, and raise their families, not a to be a vehicle for speculation.

For what it's worth, I own my own home. I was fortunate enough to have good income and buy my first home 10 years ago (without the support of bank of mum and dad), before things really got crazy (Gen Y is not all young, irresponsible kids, many of us have young families now and have been in the workforce for 15 years). I feel sorry for those joining the workforce now, particularly those in capital cities. 4 hours of daily commuting to find affordable housing is not a quality of life we should be wishing on anyone.

I'm also a Smashing Pumpkins fan, and hope to pay my $200 to see them if they tour Australia.

May 11, 2018

SMSF Trustee; what you fail to see is that the boomer generation is one that has enjoyed a massive increase in their wealth (particularly on the family home), so this will be a free kick for them too.

The fact that you have a weekender (i.e. somewhere else to go to, not necessarily as an investment property) is indicative; with most Gen X and Y, if you pay your own house off, you're doing well and a weekender is a pipe dream. Plus, that's a lifestyle choice, not an investment choice, so the issue at hand is being confused.

Let's be clear here, we all have to pay some form of "land tax" by any other name, be it council rates or water rates (liquid land tax) based on the value of the property, it's not an issue that solely affects boomers.

Eddie Pop
May 10, 2018

Whilst I agree with the theoretical gist of the article, what were most of is thinking at aged 20? It was not financial stability at an age over 60. Whilst the theory is fine, the reality is somewhat different. As Salt would freely admit (I suspect), the young are after experiences and not so much 'stuff'. A life of free stuff e.g. downloads, free content on the web etc. is a part of the new generation. There is also the eventual inheritance of property and other assets at a later date. The high costs of all asset classes due to low interest rates (thank you GFC) has made it extremely hard to acquire property relative to incomes. Yes, saving $200 a month can help but that is not where the kids are at. At some point the asset prices will drop (by how much who knows?) but until they do and create a new 'normal' this is the current 'normal'. I am 60 and loved all the grunge stuff (not so much the non grunge Pumpkins) and had a family and a mortgage in the '90s but I was not thinking of stripping back my lifestyle back then severely and I suspect that this generation will not either.

Gen Y
May 11, 2018

Well said Eddie. Greet to know some boomers get it!

May 11, 2018

"There is also the eventual inheritance of property and other assets at a later date"

Not necessarily. The idea that there will be this massive transfer of wealth to everyone when the boomers pass on is a furphy (especially if it has been SKIed).

I moved here at 22yo by myself, from Europe, I don't expect my parents (who don't come from money and will need what they have to look after my mum who is in a care home with dementia) to have anything left over when they pass on. That's why I took matters into my own hands to make my own wealth.

May 10, 2018

Obviously another person who did not bother to read the original article (but you're not alone). What Bernard is saying now is exactly what he said then.

May 10, 2018

I’m amazed Salt is backtracking on his original dig at Millennials!

Peter C
May 12, 2018

He isn't backtracking, almost immediate after he made similar comments about his intent. He was genuinely surprised at the reaction, including receiving calls from overseas journalists about his comments and the reaction.

May 10, 2018

Love those nice neat hypothetical straight line return projections! Haven’t they been outlawed?

Gary M
May 10, 2018

I bet a good deal of the $400+ concert tickets are paid for by their parents of the 20-somethings still living at home. Blame the over-geared parents for teaching them bad habits, not the kids.

Personally I don’t mind either way. None of my business really. Most people spend 100% or more of what they earn + then rack up debt on cards, personal loans, lines of credit and advances on their pay. That’s their business.


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