The one group of Australians cruising through the cost of living crisis - and how they are driving up inflation for the rest of us

Baby boomers appear to be cruising through the cost of living crisis - and risk pushing up interest rates as they continue to spend.

The older generation that lived through 18 per cent interest rates in 1989 are now the ones suffering the least from the Reserve Bank's 13 interest rate rises in 18 months.

The most aggressive rate hikes in a generation are disproportionately hurting the young and sparing the old, with the cash rate now at a 12-year high of 4.35 per cent.

Grattan Institute economist Brendan Coates said baby boomers, who are more likely to own their own home, were the ones adding to inflation with their spending.

'The fact that we've got so many cashed-up, older Australians at the moment that aren't really being affected by higher interest rates, means it's taking bigger interest rate hikes to get inflation under control,' he told Daily Mail Australia.

'That is true. They're not being squeezed at both ends.'

New Australian Bureau of Statistics data released on Wednesday showed employee living costs surged by 6.5 per cent in the year to March, as they battled surging mortgage costs.

But those on the age pension saw their living costs rise by just 3.3 per cent, compared with 3.4 per cent of self-funded retirees. 

Both measures for retirees, who are more likely to have already paid off their house, were below the 3.6 per cent headline inflation rate.

'Older Australians, they've typically paid off their home and therefore the increase in living costs is much smaller because they're not being hit by higher interest rates,' Mr Coates said.

Baby boomers made up 21.5 per cent of Australia's population in the last Census in 2021, outnumbering Generation X on 19.3 per cent, Generation Z on 18.2 per cent but tying with Millennials on 21.5 per cent.

Having paid off their home this group, born between 1946 and 1964, are the ones who benefit when the RBA cash rate increases, especially if they have their savings in a term deposit account.

'It is fair to say many older people win when interest rates rise and younger people tend to lose,' Mr Coates said.

'Those that are less affected by mortgage costs, like the baby boomers, are the ones continuing to spend in the economy.'

University of New South Wales professor of economics Richard Holden said while baby boomer spending was a factor, services - as opposed to goods - inflation was the real cause of the cost of living crisis. 

'They tend to have a higher labour component and that's where wage increases are baking in above target levels of inflation,' he told Daily Mail Australia.

'Spending on lawn bowls plays a part but it's only a small part.

'If you asked me - "What's the key driver of inflation?" - it wouldn't seem to me to be  baby boomers spending a lot.' 

A breakdown of official inflation data showed a 9.2 per cent increase in prices for recreational sports and cultural services, which would cover activities like lawn bowls and hobbies that older people have more time for. 

Postal service prices soared 12 per cent, with older people more likely to post letters instead of use email. 

But younger people are also affected by a 7.8 per cent surge in rents, and a 6.1 per cent increase in high school costs. 

The 30-day interbank futures market has now ruled out rate cuts in 2024, with underlying measures of inflation both at 4 per cent or above, which is higher than the RBA's 2 to 3 per cent target. 

It's now betting on just one interest rate cut in 2025.

ANZ senior economist Catherine Birch said a rate rise in 2024 was possible, but unlikely, because spending on goods and services, for every Australian, had been falling since late 2022.

'We think that it's a pretty low probability of another interest rate hike,' she told Daily Mail Australia. 'You can't rule it out.'