Stunted career prospects and zero real wage growth, Productivity Commission report finds

Stunted career prospects and zero real wage growth, Productivity Commission report finds

Young people have had to settle for jobs of lesser quality following the global financial crisis compared to the generations before them, a government report claims, offering some insight into a job market upended by COVID-19.

Graduates aged 20 to 34 had a harder time getting a job in their field in the ten years that followed the Global Financial Crisis, a Productivity Commission paper released this week found. 

“If they started in a less attractive occupation, it was even harder than before 2008 to climb the occupation ladder,” Michael Brennan said, chair of the Productivity Commission.

“This suggests that poor initial opportunities could have serious long-term consequences.”

The findings of the paper ‘Climbing the jobs ladder slower: Young people in a weak labour market’ are more relevant now, Mr Brennan said, as it offers an idea on what career challenges young adults will face in a recession brought on by the COVID-19 coronavirus.

“Many young people have experienced unemployment recently, and are likely to face a reduced set of job (and salary) opportunities as a result of the recession,” he said. 

“This scarring could last some time.”

Workers aged 20 to 34 experienced nearly zero real wage growth from 2008 to 2018, the report found, and workers aged 15 to 24 experienced a ‘large’ decline in full-time work. Part time work increased.

It was unlikely people ‘scarred’ by the job market would graduate to a better outcome, the report said, indicating they were likely to suffer long term career and salary prospects.

The Productivity Commission, which is the “principal review and advisory body on microeconomic policy, regulation and a range of other social and environmental issues,” was meant to present the findings at the Reserve Bank of Australia’s annual conference in April.

“The COVID-19 pandemic interrupted the conference,” the report said, ”but the central issue at the heart of the analysis, the scarring effects on young people of poor labour-market outcomes, has become even more relevant.”

Ways to protect your future finances

If you’re concerned about your financial future as Australia rolls through a recession, you’re not alone. There are many options available to you, but the best path to take may depend on your personal situation and financial goals. It’s always important to compare different financial options and to consider seeking professional advice before making any changes to your finances.

Strugglers who are looking to quickly put together an emergency savings fund may want to prioritise high-interest savings accounts with low or no fees. That said, it’s also important to look at the terms and conditions for the account’s bonus rate, to work out if you’ll likely be in a position to maximise the interest you can earn on your savings.

Simplifiers and Opportunists who want to reassess their finances may also be interested in savings accounts with higher interest rates, which could be used to help protect money for use in the future. Services that can help track saving and spending could also be appreciated by those wanting to manage their money more smoothly. Some smartphone apps, such as Google Pay, Samsung Pay, or Apple Pay can be useful, and many banks have saving and spending trackers built into their own apps or internet banking options.

Mark Bristow contributed to this news article



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Learn more about savings accounts

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit