(Bloomberg) -- Australia’s ‘millennial’ households — those with people aged 29-43 years — have experienced the largest decline in their real average disposable incomes over the past two years, Goldman Sachs Group Inc. said, downgrading estimates for the country’s broader economic growth.
Real incomes per millennial household have fallen 9.4% over the past two years, marking the largest decline across any age cohort, Goldman estimates.
“While inflation has been the largest headwind across all households, younger and middle-aged households have also experienced large headwinds from higher taxes and interest rates,” economist William Nixon wrote in a note to clients Friday, saying the cohort “disproportionately” spends on discretionary items.
“We are mindful of the risk the Reserve Bank pivots over the coming months alongside evidence of subdued consumer spending, softer wages growth and rising unemployment,” Nixon added. The RBA next meets on Sept. 23-24, where it is widely expected to leave interest rates at a 12-year high of 4.35% and stick to its hawkish rhetoric.
The weaker starting point for the level of income means the recovery in consumption is likely to be more gradual than Goldman previously estimated, with the government’s recent tax cuts having a “limited impact,” Nixon said.
As a result, Goldman downgraded forecasts for aggregate annual consumption growth to 0.9% in 2024, from 1.1% previously, and 1.5% in 2025, from 2.2%. Both are below the RBA’s estimates of 1.5% and 2.8% respectively.
The investment bank also lowered Australia’s GDP growth forecast for 2025 to 2.0%, from 2.3% — again below the central bank’s 2.5% estimate. Goldman left 2024 forecasts unchanged at 1.2%, saying firmer government spending is likely to offset weaker household consumption in the near term.
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