Boomers, Gen X vs Millennials: how Australian spending patterns are changing by generation

One of the most pointless debates in Australia is a somewhat manufactured battle between the generations.

While there might be a lot of media clicks to be had witnessing online slanging battles between Baby Boomers and Generation Xers and Millennials about who had it tougher and who is responsible for sky high property prices or environmental degradation, all of this debate produces much more heat than light.

Sure, housing interest rates and unemployment rates might have been much higher for boomers while sky high property prices have greatly increased the size of debts carried by later generations as a share of income.

Actual spending by generations is useful

What can be a more productive way of analysing generational differences – and to perhaps harness some current investment tips from the data – is to see where each generation is actually spending their money and how those patterns of spending are changing.

In that respect the CommBank iQ reports which are based on the actual spending patterns of seven million Australians are particularly interesting.

What the joint analysis from Commonwealth Bank and data company Quantium show is that there are some particular points of pain in the Australian economy – and some surprisingly resilient areas of spending.

Cost of living pressures have been broadly rising since 2022 according to the analysis and the worst of this pain is being felt by renters rather than home owners and people who are aged under 35.

By analysing actual spending data and also comparing that spending growth to inflation some interesting trends emerge.

Who is spending more in real terms?

While most people are spending more overall – which is what you would expect at a time when prices are rising – there is a clear divide between those whose spending is lagging behind inflation and those whose spending growth is outstripping inflation.

It is particularly painful to be in that first group because your spending has gone up but you are actually buying less due to inflation – which is a recipe for discontent if ever there was one.

Using this measure, Australians aged 30 to 34 have the highest cost-of-living pressure score, followed by the rest of the 25 to 44-year-old age bracket.

Then comes those aged above 75 years and between 45 and 49 who are under moderate pressure which is in line with the national average.

Some households are not feeling any pain and those aged between 60 and 74 years old had “negative” pressure scores, which means they are actually increasing their spending after inflation.

Boomer spending on the rise

This is perhaps not so surprising when you consider that this age group is either retired or close to retirement and is much more likely to have paid off or greatly reduced their housing debts.

Likewise, the numbers showing that renters are feeling much more pressure than home owners is also likely skewed because the home owner category includes households with no mortgage or only a small home loan balance.

That would reduce the overall level of real pain being felt, particularly by highly indebted house owning households who are undoubtedly feeling a lot of financial pain from growing loan repayments.

Travel breaking all of the rules

The really counter-intuitive data in the study is that discretionary spending – and particularly spending on travel – has risen sharply despite financial pressures.

What this might be pointing to is the fact that travel was greatly curtailed during the COVID pandemic which has led to a great unmet demand from people who have been cooped up within country borders.

That showed in the fact that travel spending surged by an impressive 39% compared to the first quarter of last year.

Part of that was due to the high priority given to travel by those rebounding from the strictures of closed borders and some of the increase is due to increased travel costs as well.

You would perhaps expect the focus on travel to diminish over time and also cost less as flights get cheaper but for now it seems to be one area of discretionary spending which seems to be immune from the usual budgetary pressures.

Not so lucky has been spending on clothes and household goods, which has fallen with experiences including travel, eating out and entertainment trumping more traditional goods.

The report also found that there were certain areas in Australia’s two big cities that were really feeling the pain.

In Melbourne, it is concentrated in inner Melbourne and outer areas such as Werribee, Melton and Cranbourne while in Sydney the pain is felt most in the outer south-west, alongside the inner-city and eastern suburbs, which have a high number of younger residents and renters.

Interdependence between generations

What these figures really demonstrate is that there is a high level of interdependence between the generations.

The much-derided Baby Boomers arguably hold the key to keeping the consumer economy moving, given that most other age groups are feeling too much pain to provide much stimulation.

Even those Boomers who are relying on the aged pension have their incomes indexed to inflation, which is quite different to wages which have been stalling in real terms.

With Boomers now effectively the engine room of the consumer economy, the varying generational groups within that area will be particularly keen to see the Boomers continue to open their wallets to keep consuming goods and experiences.