Baby Boomers' Spending Habits: A Challenge for RBA

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

During an Australian Business Economists dinner, RBA governor Michele Bullock emphasized that Australia's inflation is primarily driven by domestic factors, indicating a significant gap between aggregate demand and aggregate supply.

Age Group Spending Patterns

The release of Commbank IQ's data revealed a noteworthy discrepancy in spending patterns among different age cohorts. Older Australians, aged 70 or above, displayed an increase in spending higher than the inflation rate during the year leading up to September 2023. On the other hand, younger Australians, specifically those under 40, noticeably reduced their spending. Interestingly, Australians aged 65-74 spent more in September than those in the 30-34 age group.

Impact on Monetary Policy

This data raises concerns from a monetary policy perspective. Older Australians, who tend to spend more on discretionary items, are largely unaffected by the RBA's aggressive monetary tightening measures, as they primarily focus on mortgage holders. Additionally, older Australians benefit from higher interest rates on their deposits and are protected from rising inflation through automatic indexing to the Consumer Price Index (CPI).

This leaves the RBA in a precarious situation where they are implementing measures to slow down demand and inflation that mainly affect one-third of Australians with mortgages, while older Australians continue to stimulate demand through their substantial spending.

The Consequences for Younger Australians

Unfortunately, as a result, the RBA will likely have to further increase interest rates, which will disproportionately impact younger Australians. They are already experiencing significant cutbacks in both discretionary and essential spending.

Addressing Inflation and Demand

The data clearly highlights the need to address inflation by curbing the spending habits of baby boomers, rather than solely focusing on younger Australians who have already made substantial cutbacks. Both the RBA and the federal government will need to consider proactive measures in tackling this issue. Additionally, it is imperative for the government to reevaluate high levels of net overseas migration that contribute to increased consumer demand.

Published:Tuesday, 28th Nov 2023
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Finance News

Clear

Luxury Car Tax Thresholds Rise for 2026-27: What It Means for Your Next Car Loan

02 Jul 2026: Paige Estritori

Australian buyers shopping for a higher-priced new car have a fresh number to factor into their budget from 1 July 2026, with the Luxury Car Tax thresholds indexed for the 2026-27 financial year. - read more

What the 2026 Car Loan Awards Mean for Australian Buyers

25 Jun 2026: Paige Estritori

The latest 2026 personal and car loan awards from Mozo point to a clear message for Australian motorists: the lowest-cost car finance may not come from the lender you already bank with. The awards assessed hundreds of personal and vehicle loan products across dozens of lenders, with categories covering new car loans, used car loans, secured personal loans, excellent-credit borrowers and green car finance. - read more

RBA Maintains Cash Rate at 4.35% in June 2026 Decision

11 Jun 2026: Paige Estritori

In its June 2026 meeting, the Reserve Bank of Australia (RBA) decided to hold the cash rate steady at 4.35%. This unanimous decision reflects the central bank's cautious approach amid ongoing economic uncertainties and inflationary pressures. - read more

EOFY 2026: Unmissable Ute Deals and Tax Insights

11 Jun 2026: Paige Estritori

As the end of the financial year (EOFY) approaches, Australian car buyers have a unique opportunity to take advantage of significant discounts and tax benefits on utes. Several manufacturers are offering compelling deals, making it an ideal time to consider a new vehicle purchase. - read more

Electric Vehicles Capture 20% of Australian New Car Market in May 2026

04 Jun 2026: Paige Estritori

In May 2026, electric vehicles (EVs) achieved a significant milestone in Australia, accounting for 20% of all new car sales. This marks a substantial increase from previous months and underscores a growing shift towards sustainable transportation options among Australian consumers. - read more

Click for more Finance News