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

Surge in Electric Vehicle Loans as Australians Respond to Fuel Price Hikes

12 May 2026: Paige Estritori

In March 2026, Australia witnessed a substantial increase in electric vehicle (EV) loan applications, with CommBank reporting a 161% rise compared to February. This surge is largely attributed to escalating fuel prices and growing concerns over energy security, prompting consumers to seek more sustainable and cost-effective transportation options. - read more

ASIC Calls for Strengthened Consumer Protections in Car Finance Sector

12 May 2026: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has conducted a comprehensive review of the nation's motor vehicle finance sector, uncovering significant issues that adversely affect consumers. This investigation was initiated in response to a surge in complaints regarding high costs associated with car financing. - read more

Chinese Car Brands Roll Out Competitive EOFY Deals in Australia

12 May 2026: Paige Estritori

As the end of the financial year (EOFY) approaches, Chinese automotive brands are intensifying their efforts to capture the Australian market by offering a range of compelling incentives on electric and hybrid vehicles. These promotions are designed to attract both private buyers and commercial operators seeking cost-effective and environmentally friendly transportation solutions. - read more

New Partnership Offers Discounted Finance for Hyundai and Kia Electric Vehicles

04 May 2026: Paige Estritori

The Clean Energy Finance Corporation (CEFC) has announced a partnership with Hyundai Capital Australia (HCAU) to provide discounted finance rates on eligible Hyundai and Kia electric vehicles (EVs). This initiative aims to reduce the upfront costs associated with EV ownership, making it more accessible for Australian households and small businesses. - read more

MG HS Super Hybrid Now Available from $42,990 with End-of-Financial-Year Discount

04 May 2026: Paige Estritori

MG Motor Australia has announced a substantial price reduction for its HS Super Hybrid range as part of the M-Genius End-of-Financial-Year (EOFY) campaign. Until June 30, 2026, the plug-in hybrid SUV is available with a $5,000 discount, bringing the driveaway price to $42,990 for the Excite variant and $46,990 for the Essence variant. This represents a saving of approximately 10% off the previous prices. - read more

Click for more Finance News