When the young abandon Australia

Towards the end of the 1983 film Educating Rita, academic Frank Bryant is banished from his English university to a posting in Australia -- the punishment for turning up to lectures drunk and doing everything but “bugger the bursar”.

In one of the final scenes, he asks his student Susan, previously called ‘Rita', to go with him.

“I hear good things about Australia,” he says. “Everything out there is just beginning. The thing is ... why don't you come as well? It would be good to leave a country that's finishing for one that's beginning.”

The world was very different back then. Britain's economy was foundering, and a short recession in Australia notwithstanding, migrants knew that everything down under was “just beginning”.

But have things now tilted the other way?

Flamboyant London mayor Boris Johnson recently backed a report calling for a "bilateral labour mobility zone" between the UK, Australia and New Zealand, which among other things, would allow young Australians to be automatically granted visas to work in Old Blighty.

Now why would Johnson like that idea?

In the economic chaos of the later GFC years, Aussies went decidedly cool on joining the ravaged British economy -- from 40,000 migrants to the UK in 1999, the number dropped to 26,000 in 2011.

It is not hard to see why. The Australian dollar was at record highs and the resources and terms-of-trade booms were hitting their peak. Whether a youngster wanted to open a cafe in the city or join a surveying team in the desert, the money was here.

That is changing. As Callam Pickering noted recently, unemployment in the 18 to 24 age group has been rising steadily since the Lehman Brothers global shock of late 2008, from a low around 9 per cent to 14 per cent today.  

Workforce participation, which has fallen from 71 per cent to 66 per cent over the same period, also tells a depressing tale. If many youngsters had not given up job hunting, the 14 per cent unemployment rate would be even higher.

Meanwhile, growth rates in the UK are well ahead of its eurozone neighbours. Its Q3 GDP data showed 3 per cent growth year-on-year, across a broad spectrum of sectors, driven in particularly by SME jobs creation.

So Boris Johnson probably thinks that a “labour mobility” zone with Australia would see large numbers of well-educated youngsters landing at Heathrow or Gatwick.

Actually, the old Anglophone exchange between the two nations is starting to weaken, with Asian economies  -- particularly Thailand, China, Singapore, India and Taiwan -- increasingly favoured by young, ambitious expats.

HSBC has been tracking attitudes of global expats with its ‘Expat Explorer' index to find out how they rank destinations for metrics such as economic rewards and raising children.

Mayor Johnson might be alarmed to know that Australia ranks 12th this year, while the UK ranks 33rd. Oh dear.

And both British and Australian polticians should be increasingly worried about losing their best and brightest to Asia, the Middle East, the US and some specialist hotspots such as Switzerland.

That's because despite their many differences, the UK and Australia share one overwhelming problem that could chase their youngsters overseas.

Both countries have developed financial systems that present a current 18-to-24 year-old with a future of near-insurmountable struggle. In both countries, house prices have soared to lofty heights that make older generations asset-rich, and leave young generations stranded.

As Alex Proud, columnist in the UK's Telegraph newspaper, put it this week: “Our housing market has become an in-and-out club. If you're over 50, in addition to your primary residence, you may well own a couple of buy-to-lets which will augment your already well-upholstered pension. If you're under 30, you're screwed.

“If you're under 30 in London, you're super-screwed. You'll be in your 40s before you've saved enough to buy a dump in Catford. And even then it's likely that you'll be outbid by a buy-to-let investor or, increasingly and tragically, refused a mortgage because you're too old.”

Young Australians are beginning to feel the same way.

Although nobody knew it at the time, an Australian university graduate back in the early 1980s had it made. A degree actually secured them a job with above-average earnings, a deposit to get into the housing market was relatively easy to save, and if they managed to be part of a company pension scheme (in the days before the super guarantee) they would be riding a near-30-year bull market in asset prices that only juddered to a halt in 2007.

Today's young graduates struggle to find jobs, carry large education fee debts, rely on the charity of their parents to find a deposit for a home (if they can afford one at all) and face an uncertain investment future for their Australian dollar-denominated superannuation assets. Oh, and Treasurer Hockey has lifted the retirement age to 67, with more increases ahead.

So why not sail away and “leave a country that's finishing for one that's beginning”?

The answer to that question needs to come from politicians. Indeed, there is a growing political dividend to be grasped by the side of politics that successfully explains to the Australian public that negative gearing on property, superannuation tax concessions to older Australians, flatlining wages for young Australians and growing youth unemployment are utterly unsustainable trends.

The RBA continued to support our housing-finance-driven economy in its minutes yesterday, saying “support to household consumption in the near term as rising housing valuations allowed some credit-constrained home owners to bring forward their consumption”.

But who is bringing forward their consumption? Not younger Australians.

Instead, like many young Brits, they are probably bringing forward their travel plans, potentially leaving Boris and the rest of us to a grim future once they've gone.

Disclosure: the author, at 43, does not belong to the cohorts described above.