From baby booms to baby busts

Baby boomers cruising, Gen Xers planning for retirement, millennials in search of their forever home and Gen Z injecting life and energy into the inner city… here, demographer Bernard Salt surveys how each generation will live, spend and invest, now and in the future.

About two weeks into the 2024 calendar year, the Australian Bureau of Statistics population clock ticked over 27 million. In the post-pandemic recovery year of 2023, we added more than 600,000 net extra residents (including international students) to the Australian continent, boosting both the workforce and the consumer spending market. How will all this affect Australia?

Sustained trends not surge points… baby boom, baby bust and overseas students

You may think that this population increase will shape demand for goods and services, affecting the value of businesses and houses. The answer is yes… and no.

I think the community does its best to accommodate a demographic surge, whereas business responds with considered investment and changed strategies to manage what seems to be sustainable.

The hyped rate of population growth across 2023 stressed both the rental market and the housing market. But it was also a sign of things to come – and not just for 2024.

Australia is going through a baby bust. If you accept there was a baby boom in the 1950s, then there will be a baby bust 70 years later in the 2020s. This is not when 1950s baby boomers die off (that’ll start in the 2030s), it’s when boomers retire in greater numbers than Gen Z (born 2002-20) enter the workforce.

This transition is happening now and it will continue to play out for another decade. That’s why there’s a skills shortage. Toss in a two-year border closure due to the pandemic, then a re-opening and, no surprise, international students flood back in record numbers. It’s all quite logical when you look at it through a demographic lens.

Students inject youth and energy into Australia. We will be a young vital nation for decades to come

So, what does this mean for investors and business? In the chart below, I show the net change in the Australian population by single year of age between 2023 and 2033. It’s the decade ahead taking into account the baby bust and the recovery in student numbers.

The first thing to note is that there will be more Australians in every year of the lifecycle in 2033 than at any other time in history. This simple ‘growth everywhere’ trend is not the case in Japan, South Korea or many parts of Europe; yet here we will retain a relatively youthful age profile across the 21st century.

Australia offers an expanding market for household formation. This means that, from a demographic viewpoint, the tax base will continue to rise. This converts into more spending, more infrastructure and hopefully an ever-improving quality of life.

Of course, all this growth needs to be managed to minimise the impact on the environment and to retain and build social cohesion. But within the growth outlook for the decade to 2033, there sit three demographic mountains. These are surge points that are baked into the Australian demographic profile. They include those aged 18 to 28 (Gen Z), 42 to 50 (millennials) and 68 to 82 (baby boomers).

I’m sorry, Gen X (born 1965-1982), but as you can see from the chart, over the coming decade, you’re destined to build upon the 52 to 65 time only moderately. This is good for the retirement planning and superannuation industries, but there’s not enough net extra Xers to truly transform the pre-retirement stage in the lifecycle.

Now we get to the exciting bits...

Late 20s and early 30s ‘one-forthe-country’ generation precedes a Treasurer-inspired baby boom

An evident student-inspired surge in 20-somethings underpins demand for rental accommodation, student digs, lifestyle cafes, bars and restaurants that all naturally flow from the injection of young people’s energy into the CBDs and university precincts of our biggest cities.

Note also the modest, if any, growth in the 30- to 33-yearold population over the decade to 2033. This reflects the diminished birth rate that applied around the year 2000. And which subsequently inspired then Treasurer Peter Costello to suggest that young Australians thinking of having a family “should have one for the country”.

The ensuing mountain of Aussies aged 28 and younger by 2033 suggests that Australian parents enthusiastically took up the Treasurer’s challenge.

Millennials on the move… time to secure the ‘forever home’

The second demographic mountain shaping 2024 and the decade to come is the transition of the millennial generation from mid-30s towards mid-40s. I think there is a gateway in the Australian lifecycle in the late 30s. By the time they reach their late 30s, Australians are partnered up, have one or two (if not more) kids, and partners have generally gone back to work. And so, parents in their early 40s start thinking about buying a ‘forever home’ that is suitable for teenagers (who typically arrive when parents are in their late 40s).

The 2021 Census showed that the time in the lifecycle when most (working full-time) Australians peak in their income-earning capacity is 43. The entire five-millionstrong millennial generation is now moving towards ‘peak income’ at some point over the next decade. The oldest millennial born in 1983 is 41 in 2024.

The millennial generation is coming into gravitational alignment with the planet Peak Income. A millennial’s minimalist apartment in the groovy inner city is starting to look a tad un-designer-ish with toddler mess strewn across the floor. Time to move… in 2024 (and thereafter).

What income-peaking, toddler-taming millennials need in 2024 is a bigger, better lifestyle home. Something with four bedrooms, two bathrooms, perhaps a butler’s pantry (to do the real cooking), a front garden, a backyard and – the ‘musthave’ during the pandemic – a home office.

This kind of property isn’t available in the inner city… but it is in suburbia. Or, better still, in the so-called lifestyle zones located just beyond the urban fringe. Could it be that the hipster generation is reconsidering the merits of family-style homes in outer suburbia? Perhaps if we rebrand family-style homes (aka McMansions) as lifestyle living?

In either case, more families passing through (early 40s) peak income in 2024 will drive consumer demand – and not just for bigger, family-friendly housing. This demographic shift will shape demand for whitegoods, home and hardware products, family holiday accommodation, people-carrier cars (which would need to be rebranded). Oh, and for finance too, in order to, well, finance this kind of lifestyle.

A word of caution to the rising peak-income-earning millennial generation. The 2021 Census also identified the time in the lifecycle when most Australian women described their status as divorced. That time in the lifecycle is 46… just three years after peak income and perhaps five years after typically attaining their forever house. Peak male divorce kicks in at 52.

‘My-time-now’ baby boomers spill into retirement, babysitting and volunteering… in between the odd Rhine River cruise

And then we come to the baby boomer generation. I think that the pandemic has triggered quite different behaviour among the boomers. Those toying with retirement are finally retiring. This generation now straddles the years 60 to 78 with most hovering around the late 60s.

The boomer attitude to retirement is typified by the adage ‘it’s my time now’. Others believe that the pandemic has ‘robbed me of two of my remaining good years’. Yes, boomers speak about their ‘remaining good years’ and, now that travel is accessible again, it’s time to finally take that Rhine River cruise.

Others, of course, are looking at ways to (financially) help their millennial children into their forever home. Many boomers in their 60s are volunteering within the community and/or are minding grandchildren. Some are even relocating to be close to their adult children and grandchildren.

2024 will usher in new trends, behaviours and spending priorities… where else but Australia would you rather be?

The year and decade ahead are both filled with opportunity and challenge. These include the transition of boomers into retirement, the shift of millennials towards peak income, the injection of Gen Z’s energy and demand for accommodation into the city centre and fringe.

Even Gen Xers will go through a profound change in coming years. In their late-40s and early-50s, Australians become vitally aware of their superannuation balance and its state of inadequacy. Xers, like their now-retired slightly older boomer cousins (at about the time of the GFC), are getting serious about retirement planning.

However, all of this is really the stuff of life. Every generation has had challenges. And no matter the pitfalls or the problems on the road ahead, I still cannot see a better place to spend the next decade, indeed the next two decades, than right here in Australia.

Bernard Salt, AM, is one of Australia’s leading social commentators and business analysts. He heads The Demographics Group, which provides specialist advice on demographic, consumer and social trends for business. In this role he draws upon vast datasets to interpret the overall trajectory of social change in the past and into the future.