Young West Australians splashing cash on travel while other generations rein in spending has highlighted the challenge the Reserve Bank faces in fighting inflation, an economist says.
Bankwest has revealed another month of spending by the younger consumers, with new credit and debit card analysis showing the number of gen Zs spending on airlines surged 24 per cent year-on-year in July.
In comparison, spending on airlines by millennials declined 4 per cent and baby boomers fell 2 per cent.
The trend flowed to other discretionary sectors for gen Zs, with a 16 per cent increase in customers transacting at discount stores and an 11 per cent rise in those spending at electrical appliance stores.
Bankwest Curtin Economics Centre senior research fellow Daniel Kiely said for gen Zs, many of them would have been finishing high school or tertiary education with plans to travel when the COVID-19 pandemic hit.
“For some of these individuals maybe they weren’t able to do that with the lockdowns and now they’re taking full advantage of the fact that they can do this now,” he said.
“I know we’re a few years out from COVID but it has taken people a while to get confidence back in travelling and maybe saving up.”
Overall, the number of gen Z customers spending grew 5.8 per cent year-on-year, accompanied by strong increases in the volume and average value of transactions — up 10 per cent and 11 per cent, respectively.
With interest rates seen as a blunt tool, Dr Kiely said the latest data spoke to the challenges the central bank had in controlling inflation.
“There are issues with monetary policy in the sense that yes, it’s not going to effect all people in the same way and for some it may not effect them at all,” he said.
“We have seen for people that are savers, higher interest rates benefit them so there’s no guarantee that . . . changes in the cash rate will flow through to the real economy.”
Bankwest products and digital services general manager Peter Bouhlas said data showed gen Zs were defying cost-of-living challenges.
“However, while gen Z’s spending has soared, this month’s report reveals a divergence in spending behaviours, with other generations having to navigate the economic landscape with far greater caution,” he said.
“Millennials, gen X and baby boomers are all being far more selective with where they spend their money amid economic pressures, with significant declines in the number of those spending in almost all sectors.”
The number of millennials and gen X transacting fell 4.4 per cent over the year to July, while boomers declined 5.7 per cent.