Australians have done a spectacular job saving an extraordinary amount of money since the pandemic was declared. The Reserve Bank estimates the amount exceeds $245bn and now it’s hoping like hell we spend it!

And the Aussies that they need to spend like never before are a group that often get pilloried for being lucky with property, taxes, and a whole lot more — baby boomers!

Yep, the RBA’s forecasts of a strong economic rebound of 4.5% this year, which has been hampered by the slowing effects of the Omicron variant on activity, really rely on those with big post-pandemic savings to get out there and seriously shop.

Unfortunately, some experts are worried that older Aussies could prefer to sit on their savings or invest it rather than buy new cars, go on local holidays and upgrade their homes.

Spending locally sets up what economists call the multiplier effect and that’s what both Treasurer Josh Frydenberg and RBA boss Dr Phil Lowe are sweating on to make this economic recovery good for jobs, wages, inflation, growth and tax collections!

The multiplier effect happens like this: the Government spends a lot of money to stop us going into a long recession because of the Coronavirus; we then spend it and this creates jobs and demand for goods and investment from businesses, which also employ more staff, who then spend their wages and the process goes on and on.

Interestingly, the power of the multiplier effect rests on how much of our wages we spend. If we spend and therefore save half of it the multiplier effect is 1 divided by 0.5%, which equals 2. But if we spend three-quarters of it and only save 0.25%, the multiplier is 1 divided by 0.25%, which equals 4.

This leads to a bigger economic recovery and that’s what Josh and Dr Phil want and it’s why they need older Aussies to spend not save nor invest the dough they have in their bank accounts. The problem is a lot of these older Aussies are desperate to go Overseas and that’s a leakage of spending and demand from the economy, which reduces the multiplier effect.

In reality, it’s not just baby boomers who need to spend but those Australians who have paid off their homes and are still working and probably are on relatively high incomes. Many of these have seen their wealth improve not only via higher stock prices and super returns but because of the surge in house prices.

Economists always argue that rising home values underpin greater spending because people feel wealthier and that’s a very good reason why Dr Phil is currently leaning against the chorus of banking economists who want him to commit to raising interest rates this year.

The SMH’s Shane Wright reminded us today that the RBA last week told us that “household spending – which accounts for about 60 per cent of economic activity – [is expected] to grow by 5.25 per cent this year. That underpins its expectation that unemployment will average 3.75 per cent over the final quarter of 2022”.

These great figures rely on no more Omicron-like outbreaks but they also need older, wealthier Aussies to spend big time and delay going overseas. I know Alan Joyce would prefer me not to write this but before the Coronavirus hit us, we spent about $65bn a year on overseas travelling and spending.

This was great for Qantas, Europe, Asia and the US but it did rob the local economy of economic growth, which we need here for at least two good - no, great - economic growth years.

If we don’t have older wealthier Aussies doing it for the country, unemployment could be 5% rather than 3.75%, which means about 170,000 people are out of work!

One thing in our favour could be fear! Yep, a lot of Aussies might delay their yuppy-like inclinations to go overseas until they think places like Europe, Asia and the States are safe to travel to. That fear would be good for our multiplier effect.