17 April 2024
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Younger Australians hit hard by RBA and inflation

Peter Switzer
22 January 2024

It might be a surprise to young journalists that bank statistics reveal that the surge in the cost of living is hitting younger Australians more than older ones, but we’ve been here and done that many times. In fact, probably as many times as the Reserve Bank has overtightened interest rates in the past and then has had to back away and cut rates.
These revelations have timely relevance with the very important December quarter inflation reading to be released on January 31. If the Consumer Price Index (CPI) shows that the pullback in spending by young Australians because of the spike in inflation and the overall cost of living outweighs the buoyant spending pattern of older local consumers, then the RBA will refrain from another rate rise.
In fact, the central bank board will be starting to think about when rates will need to be cut. That will be determined by economic readings of inflation, unemployment, and other statistics, such as the number of consumers cutting back on spending.
Today the SMH has looked at figures from the National Australia Bank that show “…renters and recent home buyers are feeling the pinch from inflation and the steep rise in interest rates”.
So, the numbers reveal “that customers aged under 50 have typically reduced spending more compared to those older than 50, with cuts in areas including eating out, entertainment and food delivery services.”
Interestingly, NAB says younger customers are doing budgets, paying down debt and Gen Z customers are opening bank accounts like never before!
And this surge in money responsibility from younger customers is said to be reducing the growth of bad loans. So, this effectively says bankers are winning from this interest rate misery while cafes, food service businesses and entertainment providers are losing customers big time.
NAB surveyed 2,000 customers and the conclusion was that under 50s are cutting back while over 50s had no significant reductions in spending apart from car journeys and charitable giving. Clearly, many of this group is staying closer to home and charity begins at those homes!
Of course, these revelations shouldn’t be a big surprise because many younger Australians are on lower incomes and have debts linked to homes, cars, and credit cards. Much of this spending added to inflation and prompted the RBA to hit us with 13 rate rises, which drove home loan interest rates from 3% to 6%.
If you want the nitty gritty, here’s what NAB’s numbers show:

1. 54% of us cut back on eating out last quarter.
2. 50% reduced treats such as coffee and snacks.
3. 47% trimmed spending on entertainment such as going to the cinema.
4. The under 30s reduced eating out by $124 on average, food delivery outlays by $96 and micro treats by $73 over the quarter.
5. Young Australians are dealing with debt wisely, with 18- to 29-year-olds putting savings into offset accounts, 6. The 30-to-49 group was most inclined to pay down their mortgage.
7. Over 65s are running down savings to cover day-to-day living expenses.
8. And high interest accounts are encouraging Gen Z saver customers at NAB, with a 24% growth over the year.

This survey delivers two important revelations. First, the RBA’s rate rises and inflation from the rise in petrol prices, power bills and just about everything we buy is forcing Aussies to responsibly cut back on spending, which will mean those businesses setting prices will have to reduce their prices or be stuck with unbought stock or a money-losing operation.
Second, the survey’s conclusions increase the chances of a good inflation reading on January 31 and then an end to the RBA’s excessive rate rises. This will be good for stocks, our super and many younger Australians lives!

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