Independent economist, Tarric Brooker, has written an interesting article at the Avid Commentator Report explaining how Australia is a Baby Boomer powered economy.
Brooker cites a bunch of data points to make his case.
First, according to data from the Productivity Commission and the ABS, younger Australians aged under 35 saw their real incomes contract between 2008 and 2022, whereas older Australians saw much stronger income growth; albeit all cohorts have seen real wages decline recently:
Brooker then cites real household consumption data from the RBA, which shows that Australians aged 65-plus experienced the strongest consumption growth between 2003-04 and 2017-18, followed by those aged 55 to 64 and 45 to 54:
By contrast, younger Australians have experienced the weakest consumption growth.
“When looking at older demographics, the older they get, the more their real household consumption has grown”, Brooker notes.
Next, Brooker shows that “the 55-64 and 65+ age demographic amassed the largest amount of savings above trend during the pandemic”, “putting away an additional $192 billion compared with the pre-Covid trend”.
“As of the end of June 2022, Australians 55 and over held $926 billion in household savings”:
“What is interesting about Australia is that we have confirmation that the spending of older demographics continues to grow at a rate significantly faster than inflation, even as wages and broader income growth continues to significantly underperform headline inflation”, Brooker adds.
“It is now older Australians who are overwhelmingly the driver of the consumption growth”.
“Recent analysis by Commonwealth Bank, it was found that spending per capita for all age demographics under 55 were falling relative to the rate of headline inflation”.
“Meanwhile the average spending growth of demographics over 55 was pushing 10%, significantly above the rate of headline inflation”:
Brooker argues that the Baby Boomers prolificate spending is now posing problems for the RBA.
“The demographics that generally have large mortgages and are the most exposed to rate rises have already cut their consumption growth to significantly below the rate of inflation, while older generations continue to spend strongly, further stoking inflationary pressures”.
The same generation that tightened their belt hard in the run up to the 1990s recession is now not only not negatively impacted by higher rates, but benefitting from them in the form of higher savings rates”.
In short, the older generations are driving Australia’s household consumption and have forced the RBA to respond with higher interest rates, which is negatively impacting younger Australians.
To the Baby Boomers go the spoils!
