The baby boomer generation will play a crucial role in saving the Australian economy, one market expert is predicting.
With their substantial wealth and strong purchasing power, baby boomers are expected to stimulate consumer spending, drive economic growth and lead the nation away from recession.
According to US economist Edward Yardeni, the baby boomer generation holds a staggering $75 trillion in wealth worldwide and instead of passing it on to their heirs, baby boomers will most likely spend it during their golden years.
This type of spending is expected to provide a much-needed boost to the Australian economy.
So far, the only economic tools used to try to kerb inflation have been the Reserve Bank of Australia’s (RBA) rapid interest rate hikes – directly affecting mortgage-holding households and particularly generation X and millennials with young children.
These groups have seen their disposable income diminish while their real earnings are eroding at an unprecedented rate.
In contrast, the baby boomer generation, consisting mostly of homeowners, remains largely unaffected by rising mortgage rates or rent increases. As a result, they have more disposable income at their disposal than younger cohorts.
Australians over 65 have accumulated an extraordinary $160 billion in savings over the course of the pandemic, while younger Australians have struggled to make any financial progress at all.
Baby boomers, benefitting from their financial stability and real estate investments, have continued to spend generously even in recent uncertain economic times.
While it’s true their consumption patterns have contributed significantly to the Australia weathering the economic storm from the pandemic, it’s also true that same spending has compelled the RBA to respond with higher interest rates.
It’s undeniable that the baby boomer generation has emerged as a crucial force in supporting the Australian economy, and their ability to spend and stimulate consumption has been instrumental in driving economic growth.
But it’s also undeniable that the impact of their spending on interest rates has disproportionately affected younger Australians, particularly those with mortgages. As the nation moves forward, it is essential to find a balance that ensures economic prosperity for all generations.
It may not seem like it, but the government has more options in its arsenal than simply raising interest rates in order to combat inflation.
The biggest alternative it has is to reduce government spending and/or increase tax revenues. But with the government seemingly set on passing the controversial stage three tax cuts that would see the wealthiest Australians pay far less tax than they do now, the chances of that happening appear slim.
Should baby boomers have to pay more tax? Or is it a reward for working hard all your life? Let us know what you think in the comments section below.
Also read: Will massive budget surplus be used to ease cost-of-living pressure?