Australian households are stuck in a rut, and young people are confronting the double-whammy of stagnating incomes and surging home prices.

Those are the key financial concerns that arise out of Australia's most comprehensive household survey.

Known as HILDA — the survey of Household Income and Labour Dynamics in Australia — it has been tracking the economic and social situation of more than 17,000 people since 2001.

The key concern in the latest HILDA report is an alarming, persistent income stagnation.

"Household incomes have stopped growing — since 2012 we've actually had a slight decline in average household income," said the report's author, Professor Roger Wilkins from the Melbourne Institute.

Earnings inequality also increased, there has been a marked shift to part-time work and underemployment has surged.

But Professor Wilkins said inequality had remained relatively steady despite those forces, due to progressive taxation and more low income people gaining employment.

"Since the GFC that hasn't translated into increased inequality in incomes and that's very much because we've done a very good job of keeping employment-to-population rates quite high," he observed.

"We saw a rise in wealth inequality up to the GFC, but since the GFC there's been very little change in measures of wealth inequality."

Sorry, this video has expired HILDA report author Roger Wilkins says homeowners are using the equity in their property to pay for living expenses.

Surging house prices locking under-40s out of ownership

However, while the gap between the rich and poor has not widened markedly in recent times, Professor Wilkins said the same cannot be said of the old and young.

"One of the more concerning trends is a growing wealth divide by age group," he said.

"The difference in wealth between the older generations and the younger generations has been growing over time.

"It's very much connected to what's going on in the housing market."

Home ownership for those aged under-40 has plunged from 36 per cent to 25 per cent since 2002.

Home ownership rates for young Australians fell by more than a quarter in 12 years. ( HILDA/ABC News: Kylie Silvester )

Things are even worse in the nation's most expensive property market — less than 20 per cent of young Sydneysiders own a home.

That means young adults are living with their parents longer.

In 2015, 60 per cent of men aged 22-25 and nearly half of women in the same age bracket were living with their parents — that is up from 43 per cent and 27 per cent respectively in 2001.

Young home buyers borrow more to 'fund living expenses'

The situation is not a lot better for those young people who have managed to buy a home.

They are now saddled with twice as much housing debt — in real terms, adjusted for inflation — as young people were in 2002.

Not only that, but they are not paying it off.

Between 30-40 per cent of these young home owners actually increased their debt over the previous year.

Professor Wilkins said it was mainly for consumption, not to upgrade to a bigger or better house.

"I think that would be a reasonable argument that, in the face of incomes not growing anymore, that people are accessing the equity in their homes to fund their living expenses," he explained.

The exclusion of young people from home ownership, and the financial and social benefits, as well as stability, that it provides is a major concern for Professor Wilkins.

"This is an economic and social problem for Australia that does, I think, require a policy response," he said.

"I think you can't get away from the arithmetic that if you want more home owners, you're going to have to have fewer investors in the market."

Professor Wilkins said that probably means making property investment less attractive by reducing negative gearing and capital gains tax discount benefits.

Graduate wages fall, childcare costs rise

There are some other major factors beyond surging property prices explaining why young people are struggling to buy a home.

The first is that they have been hit particularly hard by stagnating incomes — in fact, recent university graduates are getting paid less than earlier cohorts.

Professor Wilkins said this is probably due to the massive increase in the number of students graduating, meaning there is a lot more competition for graduate positions across most professions.

There has also been large increases in the costs that affect many young people.

Aside from rising student debts to the Government, those returning to work after starting families are being hit with a 75 per cent rise in childcare costs for couples and a doubling in costs for single parents.

That is if those families can even access services — 80 per cent experienced at least moderate difficulties with childcare, the most common problem being a lack of availability.

Older Australians doing 'well'

In contrast to young people, Professor Wilkins said older Australians, particularly retirees, appear to be doing "relatively well".

"Partly that's through their substantial housing wealth and we're also starting to see many retirees hitting retirement with substantial superannuation balances," he observed.

People are retiring at an older age, but Professor Wilkins said that is increasingly due to financial comfort rather than physical discomfort.

"In the earlier years of this century we saw many more people citing poor health or job loss as the reason for their retirement, that's less and less the case," he said.

"So that does suggest that the labour market is doing a much better job of accommodating older workers."

The majority of Australians are now retiring primarily by choice, not compulsion. ( Supplied: HILDA )

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