Boomers officially spending more than any other age group

Extraordinary new data has debunked a widely-held perception about Baby Boomers in Australia and their spending habits.

When it comes to spending by different age demographics, thinking can often be defined by generalisation and even flat-out stereotypes.

Like the 20-something professional, living in the inner city subsisting entirely on smashed avo on toast or the retiree whose only discretionary spending is the early bird special at the local RSL.

But while these stereotypes may be representative of individuals in our own lives or of our own perceptions, data from the Commonwealth Bank and the ABS suggests that they are increasingly removed from reality at an aggregate level.

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As Baby Boomers have aged, they have as a collective generation taken the traditional perception of older demographics and completely dismantled them, from the way they dress to the way the spend their money in retirement.

According to research conducted for communications and advertising firm WPP, over 50s now account for 64 per cent of new car purchases and 55 per cent of all travel spending.

Despite the perception that Gen Y was the biggest spending generation, the WPP report concluded that:

“The over 50s Australians outspend millennials in entertainment, auto, health, travel and almost every other category”

“When it comes to buying consumer goods online, the over 50s spend about $40 billion more than millennials and Generation X each year.”

The generation who spend the most has been revealed. Picture: iStock

The hard numbers

Perhaps the best source for understanding how household consumption spending varies by age demographic in Australia in recent years comes from the Commonwealth Bank.

Through CBA’s Cost Of Living Report, the level of monthly per capita spending is revealed broken down by age demographic generally in 5 year increments, with the exception of 18 to 24’s and those 75 and over.

Immediately, the data series which excludes housing costs reveals some rather surprising results.

The age cohort most associated with recent retirees, those aged 65 to 69 now spends more per

month than any age demographic under 45.

Meanwhile, on this metric individuals aged 70 to 74 spend more per month than any age

demographic under 35.

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Australia's monthly consuming spending by age. Picture: Supplied

Annual change in real household spending data. Picture: Supplied

Despite the image in much of the nation’s collective consciousness of the spend thrift retiree, in more recent years the reality has become profoundly different.

The current crop of retirees on average have a greater means and a greater inclination to spend.

It is however worth noting that this aggregate data is based on averages, which can be significantly distorted higher by high spending individuals of significant wealth.

The Why

Part of the shift toward higher levels of consumer consumption in retirement is due to the nation’s superannuation system.

As people retire with more years of compulsory superannuation contributions under their belt, the greater the aggregate means of individuals in their retirement becomes.

Housing wealth is also a significant factor.

As retirees downsize, migrate to less expensive areas or sell off investment properties, a greater and greater portion of the nation’s $11 trillion housing wealth becomes available to be spent into the economy.

Boomers are outspending any other generation. Picture: iStock

There has also arguably been a cultural shift in the spending habits of retirees since the pandemic began.

After a long time in lockdown or being limited to from doing any number of things from travel to having a nice meal out, there is seemingly a growing attitude of seizing the day and enjoying things in the here and now.

A long time coming

While some older demographics overtaking the young for spending excluding housing costs is a new development, the shift in this direction began well over a decade ago.

For Australian households led by a reference person under the age of 45, they are in aggregate spending less on household consumption excluding housing than their predecessors were at the same age in 2003-04.

Meanwhile, non-housing consumption growth accelerates dramatically as the comparison point get’s older, with 65 and over’s seeing growth of 27.5% vs 2003-04 and 55 to 64’s seeing growth of 19.2%.

Growth in total real house consumption by age. Picture: Supplied

It is worth noting that the levels of real growth seen by older demographics are not unprecedented, in a different era one might deem them perfectly normal.

But in the modern age of real household consumption growth going more or less no where for a large proportion of the population at an aggregate level, it’s increasingly the outlier.

The takeaway

While it’s true that Baby Boomers are the wealthiest generation to have ever lived, snapshots taken at an aggregate level mask a significant divergence in outcomes within that age demographic. ‘

63.3 per cent of people in the country of pension age or older currently receive an aged pension, with 42.9 per cent receiving a full aged pension and 20.4 per cent receiving some form of part pension.

The unfortunate reality is that outside of the over 50 age demographic, inflation adjusted per capita household consumption growth at an aggregate level is all but dead in recent years. While interest rate cuts will be something of a tail wind to the consumption of under 50s, the nation has seen this particular episode before.

They are buying anything and everything. Picture: iStock

Between 2011 and 2020, the RBA cash rate was slashed again and again, from a level of 4.75 per cent in October 2011 to 0.1 per cent in November 2020.

Despite this shift, inflation adjusted household spending growth for younger demographics in per capita terms remained weak or was outright falling compared with the previous peaks.

Ultimately, the current circumstances will prove to be a major political and societal challenge going forward.

When most of a society is struggling at the same time, people can generally make their peace with the fact that times are tough.

But when one subset of an age demographic is prospering while those in younger demographics struggle significantly more to achieve a level of financial independence and quality of life similar to previous generations, it creates a substantial challenge for policymakers and our society more broadly.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator

Originally published as Boomers officially spending more than any other age group