Lisa, 66, is not feeling the effects of the economic woes facing many Australians. Instead, she’s one of a growing percentage of older Australian homeowners who are mortgage free, spending happily and experiencing the benefits of.
“I plan an overseas holiday every two years with one of my closest friends, and we just booked for this year – Christmas in Austria,” she says.
Her willingness to spend, and the fact she has money to spare on the trip – including a Sound of Music tour she has been dreaming about for years – seems at odds with the doom and gloom reporting of rising interest rates and inflation.
But Lisa is not alone.
Older Australians’ spending habits
The 2023 Commonwealth Bank of Australia’s CommBank iQ Cost of Living Insights report found that 74 per cent of Australians over 65 who own a home without a mortgage are likely benefitting from inflation – and spending more than ever.
The new data explored the spending rates of around seven million Commonwealth Bank customers. It shows that, despite the cost-of-living crisis affecting so many Australians of all ages, spending by older Australians was up 13 per cent.
Although inflation has hit younger homeowners and property investors hard, the report confirms that for people like Lisa the news is much more positive, with inflation helping, rather than hurting them.
How can inflation deliver benefits?
Economic inflation happens for many reasons.
Generally speaking, inflation occurs when the value of currency weakens because of an increase in existing currency. To explain it simply, imagine everyone has two dollars, instead of one dollar. The only way the economy can function is if prices then adjust to the way the value suddenly changed. Of course, that means nothing has actually changed at all. But, for people who then need more money to meet rental payments, because of the climbing interest rates and the impact on landlords that is being passed on to tenants, they also need more money because of rising cost-of-living expenses. The problem is, their need for more is not matched by any increase in wages or other economic support boosts.
The flow-on of inheritance
Lisa is a landlord. As an only child, she inherited the family home when she was 52, after her 85-year old mother died of a stroke. Lisa’s father had already passed several years earlier.
She fits firmly in the report’s cohort of homeowners between the ages of 60 and 74 who are either unaffected, or positively affected by the current economic climate – and she’s grateful.
“I’ve worked hard to own my own unit as a single woman but receiving the house from mum added an extra level of security – and an income stream,” she says. “I’ve been able to build up a pretty big nest egg and I’m very comfortable.”
Although she admits that most of her peers are in a similar boat, she does know some other women her age who are not doing so well.
“A couple of women I know who have had kids, missed out on superannuation, or left a marriage and had to settle assets are doing it tough,” she says.
How older Australians are spending
According to the iQ report, in the first calendar quarter of 2023, Australians spent 39 per cent more on travel and accommodation than they did during the same period in 2022. Eating out and food delivery is also up, by 8.5 per cent, which is still an overall increase when taking into account the national average inflation of 7 per cent over the same period.
The Commonwealth Bank analysis also reveals that some customers are drawing down on savings buffers they accumulated during COVID-19, while others are choosing to be frugal in some areas so they can continue to prioritise experiences.
And while spending in most categories has declined, the report confirms that discretionary spending on travel is booming.
Although she dislikes the label ‘baby boomer’, because of the apparent economic privilege associated with the generation, Lisa is happy that she is fortunate to be living a lifestyle she loves, including those overseas trips.
“There were times when I was younger when I did go without little luxuries. I think everyone has had those moments,” she says. “It’s hard to talk about spending freely when people are struggling but, at the same time, I don’t feel guilty. That’s not going to change anything.”
Are you a baby boomer who is unaffected by inflation stress? Have you spent more on travel and accommodation this year? Share your experienced in the comments below.