Before ‘the race that stops the nation’ last week, the Reserve Bank found another way to stop Australians in their tracks – it lifted the base rate by 0.25 per cent, citing inflation as the key factor once more.
In the ensuing days, financial commentators propounded theories as to what – or who – was driving inflation in the wrong direction. Interestingly, in mainstream media at least, it came down to somewhat of a generational point-the-finger exercise.
In one corner, we had the baby boomers. Roughly speaking that’s those aged 59 or older in 2023. That takes in quite a few YourLifeChoice readers! And in the other corner we have those pesky ‘young kids’, the gen Ys and gen Zs of Australia.
As someone who sits outside all those camps (born in 1965), I can smugly claim, ‘It’s not my fault!’ But is it really one generation’s fault more than another? Do we need to play a generational blame game here? Or is rising inflation a more nuanced affair?
Inflation generation
After Without a Fight saluted in the Melbourne Cup, the AFR kicked off another fight of sorts. An article penned by Duncan Hughes came with a somewhat finger-wagging subheading. In part it read, ‘the spending habits of young adults are making it hard to curb inflation’.
To be fair to Mr Hughes, it was more the subjects of his article rather than him blaming the young for ballooning inflation. One such subject, Michael Valos, said: “I scrimped and saved during my 20s [to] save a deposit for a home.”
Referring to his children in their 20s, Mr Valos followed up: “The younger generation is living more in the moment. Their attitude is, ‘Stuff it, let’s spend it now’. This is a generation that expects to go to restaurants, that expects to travel.”
Days later, though, Leith van Onselen, writing for MacroBusiness, came out swinging, metaphorically speaking. With a comprehensive suite of statistics and accompanying graphs, Mr van Onselen argued the opposite was more likely true. “The data does not support this contention,” he wrote. “If anything, it shows that the spending habits of baby boomers are driving up inflation.”
The final line of Mr van Onselen’s article leaves readers in no doubt as to his position. “The AFR is dead wrong: controlling inflation hinges, in part, on curbing the profligate spending of baby boomers.”
Us vs Them
What’s interesting, and perhaps instructional, is Mr van Onselen’s use of the term ‘in part’ in his concluding paragraph. There are indeed many moving parts that drive inflation and identifying the crucial ones is not easy, even for experts.
Neither of the articles above mentions non-generational factors, for instance. Are there such factors affecting inflation? According to The Australia Institute, yes, and they may be exerting a greater influence than the spending of any generation.
In a recent podcast, institute deputy director Ebony Bennett and executive director Richard Denniss painted a different picture. Very different. They contend that it’s corporate profits rather than general spending that’s the culprit.
Mr Denniss made a similar assertion last year, and his views have not changed since.
Cutting through the arguments
So who should we believe? In all likelihood, there are elements of truth in all the arguments. One can only hope that those who can play an active role in dampening the inflation spike, do so.
That may include ordinary Australians, like you and me, perhaps tempering our spending habits. Regardless, playing a generational blame game is unlikely to have any constructive effect.
What are you thoughts regarding inflation? Should consumers be spending less or should businesses be less greedy with their profit margins? Let us know via the comments section below.