Selfish boomers -v- stroppy Gen-Xers in bank wars
There was a fiery exchange between two readers in the comments section of one of Australia’s news websites this week which provided a handy snapshot of the generational fault line in the debate over interest rates and the cost of living.
It’s a battle which is being fought between older Australians who have paid off or almost paid off their homes and who have a vested interest in the banks jacking up rates, and younger Australians who are mortgaged to the hilt, with both partners working to cover the mortgage, the bills and childcare, for whom every single-point increase in interest rates is a body blow to the family budget.
This divide has been widened by the actions of the Commonwealth Bank and the ANZ in overshooting the Reserve Bank’s official cash rate and stumping for controversial interest rate hikes. It has also been fuelled by the stated intention of the Reserve Bank itself, in trying to encourage more Australians to save, rather than getting themselves saddled with debt. As a result, for every angry 30-something or 40-something mortgagee who is fuming about the bastardry of Ralph Norris and Mike Smith, there’s a guy in his late 60s who’s planning a fortnight away in the caravan with his wife, saying: “Thank you, fellas.”
This is because when the banks raise interest rates, they also generally raise deposit rates on savings. For all the talk about the lack of competition between lenders, and the stranglehold the big four banks enjoy over mortgages, there is a much higher degree of competition within the savings market. So the oldies who have a bit tucked away, who are already benefitting from this competition, cash in again when interest rates go up on deposits. In addition, many of them rely on super schemes which hold blue-chip bank stocks, and they love the fact that the banks make mega-profits which keep the share price high.
In the comments section of The Australian this week, a couple of readers representing both generations went toe to toe on this issue.
A reader by the name of Bill Banter, presumably an older fellow, stated that the problem with so many members of the younger generation was that they wanted to have everything, and that saving was no longer regarded as “cool”.
This was the response from a gen-X reader, Bemo. It’s worth quoting in full as it encapsulates the sense of frustration which this generation feels at the attitudes of the oldies.
Bill Banter, it isn’t that saving is “uncool” as you term it, it’s that it’s near impossible for anyone with kids and a mortgage to support. I’m very tired of smug old baby boomers who were privy to cheap and plentiful housing, government-owned utilities (cheap electricity, gas, council etc) free university and plenty of job availability. They didn’t need seven years worth of annual salary to be able to afford today’s houses, and I’m talking modest 3 bed 1 bath, not boxy pseudo “mansions” 40k out of town, nor did their normal bills virtually double over 2-3 years due to privatisation. They also didn’t need two adults working just to put food on the table. People like this have no idea of the financial stresses of trying to keep things afloat, they did it in a slower, easier time. Save the self-righteous judgements for when you’ve walked in the same shoes as those who are today propping up your negative-geared rental properties and your access to government pensions at exceedingly generous asset terms.
As a member of Bemo’s generation, there are many elements of his email which struck a chord with me. Thinking back to thirty years ago, the number of mothers in part-time paid employment was negligible compared to today. Mothers in full-time paid work were largely non-existent. It partially reflected the dated gender expectations of the time – I can recall conversations whereby mums would declare that they had decided to work a couple of days a week to give themselves something to do, or to earn what was patronisingly called “pin money”. But it also reflected the fact that money was not as tight then for young homebuyers as it is now.
These days most couples under the age of 40 are forced to work out of the crushing economic reality of servicing a mortgage which, as Bemo writes, represents a much higher proportion of average earnings than it ever has.
One of the more galling features in the Gen X-Baby Boomer divide is that all the really hard decisions about our economic future are being put off so that the post-war generation doesn’t suffer any downside. There’s a pretty obvious hint from the title of the 2020 Report on our ageing population - in that none of the life-altering policy changes will be adopted before that date, such as the proposal to increase the retirement age to reflect the fact that we’re living longer, healthier lives than ever before.
The boomers will dodge that unpleasant little upheaval in their autumn years. It will fall instead to the gen-Xers – which is probably a good thing, as our homes are so damned expensive that we’ll need to work until we’re 70 anyway to pay for them, which is something our older friends might care to think about before they toodle off in the caravan.
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