Australia's Gen-Z outpaced boomers' income gains during pandemic

AUSTRALIA'S younger generation recorded stronger income growth and saved more than their older counterparts during the pandemic, reversing a long-running trend, Commonwealth Bank of Australia (CBA) said.

Income and spending growth by Generation-Z (Gen-Z) - people born after the mid-1990s - outpaced all other age cohorts in the 12 months through March, buttressed by government payments, CBA said in a research note Tuesday (May 17).

Young Australian workers were hit particularly hard during the pandemic as the restaurants, hotels and other services that employed many of them were shuttered during lockdowns. Yet, as a result, a large proportion of government fiscal largess was directed to this group, which also benefited from rent reductions and other pandemic-era measures.

"Gen-Z earned more and saved more," said Belinda Allen, a senior economist at CBA. "We've held the view for a long time that households over the pandemic built up excess savings. These data really help show that it's the younger generation that did better than others so that will help cushion spending to some degree as interest rates rise."

The windfall for Gen-Z, or Zoomers as they are also known, is a reversal of trends in recent years where record-low rates sent asset prices soaring, benefiting older Australians who owned a home or held shares. That exacerbated intergenerational inequality.

Australia began its first policy tightening cycle in 11-1/2 years this month with a larger-than-expected 25 basis-point hike to take the cash rate to 0.35 per cent. Money markets are pricing in consecutive monthly rate rises through the rest of the year.

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Policymakers say there is increasing uncertainty over how consumer spending, which accounts for about 60 per cent of the A$2.2 trillion (S$2.1 trillion) economy, will respond to rising rates. Australia's household debt is among the highest in the developed world.

“Gen-Zs are starting off with better savings but the question is with Covid restrictions easing and offshore travel back on the agenda, what will they do with their savings?” Allen said. “We don’t know the answer to that.” BLOOMBERG