ABC finance guru Alan Kohler delivers a brutal message to boomers during his regular finance segment: ‘Sorry about that, kids’

Finance guru Alan Kohler has explained how young Australians pay for the Reserve Bank’s repeated rate hikes, while the older generation makes money.

Kohler this week used data published by Commonwealth Bank that analyzed its clients’ spending habits to show that 18-34 year olds are cutting spending, while those over 35 are spending more despite high inflation.

“Millennials and Gen Z are cutting back on their spending and doing all the hard work to help the Reserve Bank bring inflation down, but baby boomers are spending more and undermining that effort,” Kohler said.

“So…sorry about that, kids.”

Despite the RBA failing to raise interest rates at its most recent meeting, it seems Aussies are far from out of the woods with revised forecasts from the RBA showing that the economy will take longer to recover than expected.

Australia’s central bank has downgraded its forecast for the Australian economy to a low of 0.9 percent annual growth through December 2023.

This is less than the 1.2 percent pick-up in activity forecast three months ago in the May monetary policy statement.

According to the August statement, economic activity is expected to recover next year and into 2025.

“GDP growth is expected to remain subdued for the remainder of 2023, with GDP per capita declining over this period,” the statement said.

“The weak near-term outlook reflects subdued growth in household consumption as higher interest rates and cost-of-living pressures weigh on real disposable income.”

Other adjustments to the forecasts have been minor, but RBA inflation now needs a little more time to fall back within the 2.8 percent target by the end of 2025.

According to the central bank’s May projections, headline inflation would reach three percent by mid-2025 – at the high end of its target range of two to three percent.

According to August forecasts, inflation will fall slightly short of target at 3.1 percent by mid-2025.

The relatively long wait for inflation to return to target levels is about maintaining job growth, with the RBA reiterating the “economic and social benefits” of keeping as many people in employment as possible.

Adam Boyton, ANZ’s head of Australian economics, said the very slow return to target, slightly below May’s forecasts, gave the statement a “slightly aggressive tinge”.

But it wasn’t enough to convince ANZ economists to dampen expectations of an extended pause, with the RBA labeling risks to the inflation trajectory as “broadly balanced.”

Threats to higher-than-expected inflation were consistent with previous commentary and include sluggish productivity growth, strong wage increases and rising profit margins even as prices fall.

The global picture is working in the opposite direction, with inflation falling faster than expected in many countries and China’s economic recovery losing momentum.

Question marks still hang over consumers – spending could be resilient if labor market strength continues, or alternatively, spending could fall as unemployment rises.

Those with mortgages are also under immense stress, with repayments set to peak at 9.8 percent of household disposable income by the end of the year.

The consumer watchdog gave borrowers a win for market competitiveness in mortgages on Friday when it chose to drop the proposed merger of ANZ and Suncorp.

Mick Keogh, deputy chairman of the Australian Competition and Consumer Commission, said the acquisition could significantly reduce competition in the home loan market.

“More than a third of Australian households are mortgaged, with loans totaling around $2 trillion, illustrating the importance of not substantially reducing competition in this market,” Keogh said.

ANZ said it plans to appeal the ACCC decision.

Competition Secretary Andrew Leigh said the economy is increasingly dominated by “more and more big giants”.

“We have seen an economy become more concentrated in recent decades, potentially with detrimental consequences for consumers and workers,” he told Sky News on Friday.