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.
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.
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.
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.
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
Source: Paige Estritori
|Merger Approved: ANZ Set to Acquire Suncorp Bank
21 Feb 2024: .Paige Estritori
In a pivotal ruling, ANZ's bid to consolidate with Suncorp's banking division has been granted permission, marking a significant evolution in Australia's banking landscape. The Australian Competition Tribunal (ACT) delivered a positive verdict for ANZ's $4.9 billion acquisition, challenging the earlier decision made by the Australian Competition and Consumer Commission (ACCC), which had raised concerns about market competition last August. - read more
|Revitalizing Australia's Grocery Market: A Push for Diverse Ownership
21 Feb 2024: .Paige Estritori
Nationals leader David Littleproud has initiated a call to action that may reshape the Australian grocery landscape, currently dominated by supermarket titans Coles and Woolworths. Amid revelations of the supermarkets’ aggressive business strategies, there is a growing clamor for policies that could see these chains relinquish some of their stores to enhance market competition. - read more
|Australian Shares Dip Slightly Amidst Varied Sectoral Performances
21 Feb 2024: .Paige Estritori
In a day marked by contrasting sector performances, the Australian Securities Exchange (ASX) witnessed a minor fall. With notable fluctuations in key industries such as mining and finance, the market revealed the complex interplay of corporate and economic dynamics. - read more
|Banks Shift Focus: Major Cutbacks on Cash Services Revealed
19 Feb 2024: .Paige Estritori
In a strategic pivot that mirrors the broader industry trend away from traditional banking modalities, ANZ, one of Australia's leading members of the 'big four' banking groups, has notably withdrawn cash services from several of its branches in metropolitan Sydney. This move has sparked considerable discourse, highlighting customers' concerns amid widespread alterations in the banking landscape. - read more
|How Are Our Banks Handling Vulnerable Clients?
17 Feb 2024: .Paige Estritori
In a world where financial safety is paramount, the crucial balancing act between respecting Powers of Attorney (POA) and protecting vulnerable customers becomes increasingly challenging. Financial institutions adhere to a code of practice obliging them to be vigilant against abuse, particularly financial elder abuse—a serious concern that brings to the fore the question of due diligence and customer safeguarding practices. - read more
|Top Tips for Australians Navigating the Online Car Market
The Australian automotive landscape has witnessed a significant transformation with the rise of online car sales. The concept of browsing, selecting, and purchasing a vehicle through digital platforms has gained immense popularity, offering consumers a vast array of choices at their fingertips. - read more
|The Smart Aussie Buyer's Guide to Securing the Best Price on a New Car
There's a unique thrill that comes with purchasing a new car; it's not just about getting from point A to B, but about fulfilling a dream and the freedom of the open road. However, with the excitement comes the need for careful planning and smart decision-making to ensure that your investment pays off in the long term. - read more
|Car Loans: Secured vs Unsecured
Car loans play a pivotal role in empowering individuals to afford their own vehicle, which can be a significant purchase. These loans, structured to fit within one's financial situation, can ease the burden of acquiring a car and assist in achieving personal convenience and mobility. - read more
|Your Car Loan Journey: From Application to Approval
In this article, we are embarking on a guided journey that we believe will help immensely in navigating the intricacies of the car loan process. - read more
|The Essential Guide to Securing Affordable Car Finance in Australia
Finding an affordable car finance option can make the dream of owning a vehicle a tangible reality for many Australians. It’s about understanding the intricacies of the loan market, interest rates, and finding a plan that aligns with your financial prospects and constraints. In a society built on the convenience of mobility, securing a car that meets both your needs and your budget is essential. - read more