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Generation Y drowning in debt. -

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Australia may have avoided the worst of the global financial crisis, but for Generation Y, it
barely registered in the first place. Broadly speaking, the under-30s spent their way through the
global financial crisis and continue to do so.


KERRY O'BRIEN, PRESENTER: Australia may have avoided the worst of the Global Financial Crisis, but
for Generation Y it barely registered in the first place. Broadly speaking, the under 30s spent
their way through the GFC and continue to do so. But Generation Y has become generation debt.
Kirstin Murray reports.

KIRSTIN MURRAY, REPORTER: They're young, they're savvy and they're ever-optimistic. For Generation
Y, shopping's a pastime and they're more than happy to burn what they earn.

MARINA EKONOMO, STUDENT: I end up finding a lot more than I ever wanted or needed. Just always
wanting. Definitely wanting, not needing.

KIRSTIN MURRAY: Their budget may be limited, but that doesn't stop these young women from having
fun, especially when a credit card's on hand.

STEVE KEEN, ECONOMIST, UWS: Gen Y and Gen X think nothing about whacking everything down on the
magic plastic and going straight into debt, but they've been totally conditioned to debt being the
normal situation.

KIRSTIN MURRAY: It's the tool of trade for those aged under 30. Marina Ekonomou has one; Sheree
Purcell uses two. Both are full-time students.

SHEREE PURCELL, STUDENT: Yeah, I've got one credit card that's $4,000 and it's maxed out. And I've
got another one of $1,500; that's also maxed.

KIRSTIN MURRAY: Generation Y's relaxed attitude towards personal debt might explain why they make
the majority of credit card and phone applications - something industry knows all too well, say

STEVE KEEN: Banks really view young people as one of the only two pieces of turf they haven't yet
completely conquered: the young and the government, and that's where the lending is currently being

STEVEN MUNCHENBERG, AUST. BANKERS ASSN: Often young people won't have existing banking
relationships, so there is an opportunity there for banks to form a relationship with them.

KIRSTIN MURRAY: Credit reporting agency Veda Advantage found Generation Y were the most likely to
default. Last year, 175,000 18 to 30-year-olds failed to pay up.

Ben Mercer learned the hard lesson of easy credit when he racked up more than $5,000 in unpaid

BEN MERCER: I decided to get the credit card firstly to help pay off some bills, and then when I
got the notice that I had maxed out the credit card and realised I couldn't use it anymore and how
much debt I was in, it floored me.

KIRSTIN MURRAY: The 22-year-old had been chipping away at his debt until a new phone proved too

BEN MERCER: My first iPhone bill was about $1,200, and that, again, shocked me because I didn't
know what it was for.

KIRSTIN MURRAY: Consumer group ACCAN says it's time regulators investigated the sales pitch used by
credit providers.

ALLAN ASHER, COMMUNICATIONS CONSUMER ACTION NETWORK: They make it look as though your maximum
liability is going to be a certain sum, $29 or $39 a month, when they know that two thirds of the
people who take those ones are gonna end up breaching those caps and paying a whole lot more.

KIRSTIN MURRAY: But economist Steve Keen says parents also play a role in Generation Y's money

STEVE KEEN: If you take an average 20-year-old now, when that person was born, the average family
owed 17 per cent of GDP as the level of its mortgage debt. That family now owes 90 per cent. So it
isn't just the kids themselves that have been borrowing the money, the parents have been borrowing
it willy-nilly as well.

KIRSTIN MURRAY: Before Generation Z goes down the credit path, they're being given a lesson in
financial discipline. Youth support groups are visiting schools throughout Melbourne, warning
students against rushing into credit.

EMMA ASCHER, ST KILDA LEGAL SERVICE: Part of it is to give them the confidence to be more
assertive, take their time to understand what they might be entering into and make informed

DUNCAN RINTOUL, NATIONAL YOUTH AFFAIRS RESEARCH CENTRE: 12, 13 to 14-year-olds, if they owe money,
they'll owe on average around $100. But 16 and 17 years old, the average actually comes up around
$400, $500.

KIRSTIN MURRAY: Social researcher Duncan Rintoul surveyed debt levels amongst Generation Z and
found owing small amounts of money could prove a useful life lesson for children.

DUNCAN RINTOUL: Owing money and being in debt and being in debt safely is a part of adult life in
Australia as well. And so, questions around, "How do we eradicate debt among young people?" I think
is the wrong question.

KIRSTIN MURRAY: Banks say they offer games like this to help improve financial literacy amongst
their young customers. Industry chief Steven Munchenberg says it's one of the many initiatives
banks fund to help foster a financially savvy community.

STEVEN MUNCHENBERG, AUST. BANKERS ASSN: Well there's a big disincentive for banks to lend to people
who can't repay the money. There's no point in us making a few hundred dollars on credit card
interest if we have to write off a few thousand dollars on a debt that's gone bad.

KIRSTIN MURRAY: But Steve Keen says banks are making much more than they lose.

STEVE KEEN: The level of default's very, very high, but of course so are the margins. If you're
getting a margin of 15 per cent above your cost of funds by giving money to - giving debt to Gen
Ys, you can handle virtually a one-in-seven level of default and still come out slightly ahead.

KIRSTIN MURRAY: From Thursday, new laws will come into play making it illegal for credit providers
to lend more money than consumers can afford. Steven Munchenberg agrees that could reduce the
number of credit cards banks approve, but warns young people may simply go elsewhere.

STEVEN MUNCHENBERG: While we are happy to work with the Government on new laws, we are also
concerned that they don't have the effect of driving, particularly younger people, into the arms of
unregulated lenders, where they're more likely to face difficulties.

KIRSTIN MURRAY: By the time Sheree Purcell graduates, she'll face a $20,000 HECS debt on top of her
$5,500 credit card bill. But like many in her generation who've grown up with debt, she has every
confidence she can pay it all off.

SHEREE PURCELL, STUDENT: It's gonna be there until I start working and I can pay it off properly.
But at the moment I pay about $50 a month and it gets charged about $20 in fees a month, so it's
not really gonna go anywhere for a while. But, that's alright.

KERRY O'BRIEN: Kirstin Murray with that report.