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Boomer spending boost could fuel domestic tourism bonanza

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By John Beveridge - 
Boomer spending Australia domestic tourism industry

Could the combination of a lower Australian dollar, higher interest rates and big spending boomers produce a domestic tourism bonanza?

It is an interesting question given some of the recent evidence that higher interest rates are already producing higher spending by those aged above 50.

Actual spending information is much better than spending intentions and fortunately there was a wealth of it buried deep within the Commonwealth Bank’s (ASX: CBA) profit results.

The numbers showed that among Commonwealth’s 15.9 million customers which represent a wide cross-section of Australians, spending was up close to 5% for the quarter for those aged between 55 and 64 and 6.4% for those aged above 65 compared to the previous year.

Factors influencing increased spending

Partly that may have been caused by the necessity of paying for inflated prices but the other factor that looks certain to be playing a part is the greater confidence that is coming from earning much better interest returns on savings as rates rose to try to reduce inflation.

That resulted in not only greater spending on the part of older Australians but also greater savings by them simultaneously – a result that has not often been seen in the previous decade in which interest rates have been very low.

It is the combination of greater spending and greater savings that promises to throw a potential lifeline to the Australian economy that is suffering from a big spending pullback from younger generations as higher interest rates and inflation pare back their spending power in a big way.

Role of investments and dividends

Also important in empowering the increased spending by the Boomers is generally good investment results by super funds and fairly strong dividends from most of the companies in the just finished profit reporting season.

Combined, all of these influences might be giving many pre-retirees and retirees increasing confidence and a wealth effect that is needed to swim against the tide of spending cutbacks and gloomy consumers.

Who holds the savings?

The Commonwealth Bank report also showed that older customers have most of the savings, with 62% of the bank’s deposits held by those over the age of 55.

More broadly, the Boomer demographic is far from a spent force with almost 7 million people over the age of 55 in Australia – big enough numbers to keep the economy growing and to boost employment among younger generations.

Lifestyle choices: travel and dining

If my Instagram feed is any indication, the over 55’s have been widely roaming the world this winter, helping to boost crowds in many European and Asian summer spots to avoid the cold weather at home.

With this demographic responsible for more than half of Australia’s travel spending and a fair chunk of eating out, the question of where this more confident spending will appear is also crucial.

The latest Flight Centre (ASX: FLT) profit result also shone a light on how important the older generations are to travel, with 60% of its leisure bookings for people aged 50 or older.

Like the Commonwealth Bank numbers, the Flight Centre result showed that it is the older generations who have the money and are spending it on things like travel.

Younger generations are battling rising mortgage payments, rent and elevated living expenses.

Impact of a weakening Australian dollar

The weakening of the Australian dollar might even encourage more local spending on eating out, entertainment and travel should the Boomers want to get more bang for their falling buck.

Certainly, the latest consumer confidence figures show a fairly desolate landscape apart from older Australians.

Consumer confidence has recovered a little but is still in deeply negative territory with the ANZ (ASX: ANZ) and Roy Morgan numbers up 2.3 points to 78.1 points – still well below the more recent monthly average of 111.1 points.

Consumer confidence has been bouncing around in a narrow range between 75 to 78.5 points for six weeks now, with falling real wages landing the index even lower than it reached during some of the COVID lockdown periods.