Neale Prior: Why blaming big-spending baby boomers for high inflation is a dangerous game

All of us baby boomers should get ready for more bashing during Federal Budget week.

Treasurer Jim Chalmers and economic pundits will be constantly reminding us how Australia is walking a fine line in an outbreak of inflation and a painful economic downturn.

The word “stagflation” that became part of the political lexicon in the mid-1970s is being bandied about as governments around the world keep borrowing squillions and zillions to fund their agendas.

Amid all this, those of us born between 1945 and 1964 will be reminded just how lucky we were to be brought up in a time when property was so cheap and life was so carefree.

We are going to be reminded that we need to stop spending our good fortune for the sake of younger people whose lives will be made even tougher by another interest rates rise.

Baby boomer spending is being blamed in the US and Australia for our central banks being so reluctant to cut official interest rates despite evidence of economic slowdown.

The spending of retirement savings by baby boomers is creating inflationary pressure in developed countries beset by supply shocks and linked to the COVID-19 pandemic. And with asset prices continuing to rise, the luckiest people are apparently inflicting the world with the wealth effect — an economic theory where our spending rises as the value of our assets increase.

This has given rise to ridiculous inter-generational attacks, such as reports based on an Australia Post analysis saying boomers continued to spend big online while young Australians battled with rising cost of living and higher interest rates.

And while not picking out baby boomers, Bond University quantitative finance academic Rand Low called on Australians to dial down our discretionary spending. “Focus on your needs, and not your wants,” said Professor Low. “And have wisdom to discern the difference.” That’s great advice from a fiance guru who has worked on Wall Street for Bank of America and BlackRock.

It is almost up there with a Sydney financial paper quoting top end investment adviser Mike Aitken decrying $240 tomahawk steaks flying off the grills in the harbour city’s lowly western suburbs.

That was a puff piece blaming the wealth effect on the profligate baby boomers.

It is downright dangerous to create such inter-generational divides, particularly when it is only supported by the smoke and mirrors of a fashionable economic theory. Keeping Australia afloat is a battle we should be in together, not apart.