What is the AIPN?

Who is James Cagney?

How Gen X have affected the Boom-Bubble-Bust Cycle

Written on the 22 August 2016 by James Cagney

Part 2 - Generation X ((born between 1965 to 1979)

The economy, the share market and  the property market are all more dependent on on demographic trends than the government's economic policy, migration policy, population growth rate or what property developers do or plan to do. Property and Financial researchers and experts predict the supply and demand trends, which does affect property and share prices but  it's largely demographics that determine economic trends. I have covered the reason why economies of the world go through the BOOM-BUBBLE-BUST cycle in a previous article that I wrote  You can access this by clicking >>> DEMOGRAPHICS. If you chose to Ignore these demographic trends you will do so at your own risk.

These demographic trends are closely allied to Spending Cycles. The Baby Boomers, Generation X, Generation Y and the Millenniums have significant and diverse spending habits and this has a profound effect on the economy and more importantly on your career, job, assets, income and personal wealth. Note that this is a 'generalization' of the Gen X demographic.

From 1990 Generation Xs in Australia were taking over the top jobs from the Baby Boomers.  When Baby Boomers (BBs) reached their 60s Generation Xs  tend to think of the BBs as "Past it" (outdated, a safety hazard and not much better than nuclear waste). I know Gen Xs will appreciate this reference as a  joke but I am not so sure the BBs will.  Gen Xs were raised differently to BBs by their parents and teachers. Dr. Spock's teachings were popular. BB's told their children how great they were. They were praised for everything rather than punishing bad behaviour or being taught respect for themselves and for others not being taught to take responsibility for their own actions. Corporal punishment was abandoned by the schools and children were given "more appropriate"  sorts of punishment.  It was called "Positive Reinforcement" rather than the negative and 'cruel discipline' of the past. Gen Xs have the attitude that they are the best and brightest which is viewed as disrespectful by the elderly and in the business world. Gen Xs sincerely believe they are better educated and trained than the BBs. You can't blame them - children learn what they live and then live what they have learned. They demanded larger salaries, equal gender rights, more incentives for performance, more leisure time for them to enjoy life and family etc., etc.

Gen Xs spent money on luxuries, designer clothes and sunglasses, technology and entertainment in their twenties. They married later than the BBs - mostly in their late twenties and early thirties.  Generation Xs have fewer children than their parents. Many had seen their parents struggle with the burden of mortgages and the cost of bringing up large families.  Gen Xs bought nice houses, luxury cars, expensive furniture, the latest electronics, smart phones, largely on credit, unlike their parents, who paid cash, debt became a way of life for GenXs.

The "Technology Boom" was born and Gen Xs appetite for the latest smart phones, sound systems, wide screen televisions, watches, cameras, DVD players, X-Boxes, Nintendos, laptops, appliances,  iPads and Android Tablets was unquenchable. They purchased multiple television sets for their home. They purchased multiple smart phones and computers, laptops and Tablets for the children. The BBs just watched in awe, shaking their heads as Gen X  parents lavished their children with toys, luxuries, restaurants, take- out food and holidays. Dot com millionaires appeared as investors scrambled to climb on board the Technology boom.

Gen Xs want to enjoy life and their spending trends drastically changed the economy of Australia.  Recent research revealed that for the first time in 30 years in Australia there are more renters in the 25 year to 35 year old group than there are mortgage holders.  Obviously, and unfortunately, the dream of owning a home was no longer that important nor easily achievable. For the rest of their lives they will rent as house prices continue to be out of their reach. For many Gen Xs the great Australia dream of buying a home is now a distant memory. There will be very little chance of Gen Xs inheriting their parents home because they will have to sell the family home to pay for the nursing care of their elderly parents. Don't say that will not happen - it is happening now as Baby Boomers are having to pay +/- $300,000 to private nursing homes as a 'care bond'.

Because of the lavish spending trends of the Gen Xs both parents had to work to keep up their lifestyles - the stay at home Mom became a thing of the past. Child Care facilities sprang up overnight  in every suburb.  The founders of these Child Care centres, like ABC Child Care etc,  became millionaires as their companies listed on the stock exchange.  The Gen Xs appreciated the advantages of private education as opposed to State schooling and more and more private schools, colleges and universities sprang up across Australia. These private education facilities were promoted heavily overseas and foreign students flooded into Australia. Of course these schools promoted the lifestyle of Australians and the possibility of permanent residency for foreign students after they completed their courses or degrees.

Unhappy with the quality of public health system their parents had Gen Xs paid for private health care. The government saw an opportunity to save money and gave income tax incentives to the consumers to take private health cover. Private hospitals became the vogue and sprang up mostly in the capital cities and large regional centres. However private health care did not fulfill their expectations. Gen X parents now struggle to pay the additional medical excess cost of private hospitals, specialists and the high cost of medication and alternative or supplementary medical services such as physiotherapy, denstry, optical, and natural therapies.

Gen Xs are 'technology smart' and for those who have managed to save a deposit for a home they make extensive use of the Internet for their research.  However the surge in population growth in the major cities pushed the demand for homes and with limited supply the prices soared. Those who could buy over committed themselves with high mortgages. Research shows that many homeowners are paying over 40% of their income on their mortgage. The declining interest rates have helped these mortgage holders over the past year but the interest rates will increase again putting huge pressure on Gen Xs.

The Gen Xs who intend to invest their money in the share market and in property have access to extensive research through the Internet. They study  the markets before they buy and as a result  the unscrupulous brokers and agents are becoming dinosaurs. For example, Revalu8 is a web based platform where the real estate agent is no longer necessary in a property transaction. Through Revalu8 the seller is in control and not the real estate agent. By using Revau8 the buyers get a substantial part of the money in a rebate which used to go into the pockets of the real estate agents. Buyers can do their own research and no longer are influenced by property spruikers. In addition, you do not have to be  licensed real estate agent to earn money through the referral and network marketing program of Revalu8. If you want to know how to get on board this revolutionary program click >>> REVALU8.

From the early 2000s the BB and Gen X executives of the larger corporations were driven by market share and short term profits rather than sustainable profits and the economy of Australia and other countries in the European Union and the USA  boomed.  Banks and financial lenders jockeyed for market share and credit was freely available. The Global Financial Crises (GFC) should have been very predictable as executives chased sales at the expense of common sense. And then the  after the BOOM -BUBBLE-BUST cycle happened once again throughout the globe. 

Fortunately for Australia the country had a $600 million surplus in it's trading account mostly due to the commodity boom and good fiscal management of the Coalition government which had been in place since the early nineties. During the GFC the Labour government spent the surplus of $600 million plus another $400 million on an economic stimulus package which helped Australia through the tough global economic fiasco. Some of these stimulus  programs were badly managed like the Pink Bats debacle, the School Hall building program (which made many builders rich), gas heating giveaway to motels and hotels and the solar energy program. However money pumped into the economy is a strategy to stimulate the economy and program did it's job.

However, Australians now have close to $1 Trillion dollars debt to repay to the world banks and the interest of $400 million a day which we can't afford. Our national debt is increasing daily as the Government struggles to pull in the reigns of "Entitlements" to which Australians became accustomed during the boom years. How on earth are we going to pay this increasing debt which is about to blow out as the Baby Boomers reach retirement age. We have around 12.5 million taxpayers in Australia - so how are the GEN Xs and Gen Ys supposed to cover the spiraling cost of keeping 4 million plus retired baby Boomers, increasing by 800 a day and over 300,000 per year. The answer is simple - increase taxes or increase the tax payer base through carefully selected skilled and business migration policies. The strength of an economy is dependent on the ability of a government to collect taxes. Australia has an amazing system to collect taxes. The increased taxes will fall on the shoulders of Gen Xs, Gen Ys and the Millennium's and the saying "born free and taxed to death" will become a stark reality for these Demographic groups. 

Unfortunately the peak spending phase of the Baby Boomers is almost over and this is going to effect the economy, the jobs and lifestyle of Generation Xs, Generation Ys and the Millenniums. Life for these demographic groupss is about to change dramatically. Ultimately the demands of the Baby Boomers will have a detrimental effect on the economic policies of any government in power today and into the future. Find out why this is a forgone conclusion in my article titled "The Grey Tsunami" is here so click >>> THE BBs .

Australia has gone through the longest period in it's history of economic growth. The economic criteria to declare a recession is after two quarters (2 x 3month consecutive periods) of negative growth. We have had excellent growth from the third quarter of 1991 through to the second quarter of 2016. That is 25 years of prosperity. Sure - we have had commodity price drops which have resulted in redundancies mostly in Western Australia and Queensland but we still have had positive economic growth overall. We have had redundancies in retail jobs as on-line marketing has become increasingly popular. Computer stores like Dick Smith shed thousands of jobs. Many of the laid off people have been soaked up by the services industry which is still booming as consumers have less and less time to handle their chores at home like gardening, house cleaning, window cleaning, painting, washing cars etc. However I must point out that this is short term solution because in the coming BUST people will have to find the time to do these menial tasks because they either will not have the money or worse still - become unemployed. That is why the present Coalition government is so obsessed with "Innovation" to create jobs into the future.

Many of the Gen Xs have never lived through a recession during their working livetime. They have no idea what it is like to do it really tough in a declining economy - unlike the USA which went through great economic upheaval with many citizens losing their homes and jobs during the Global Financial Crisis (GFC) in 2007 - and still continuing to a lesser degree today (almost 10 years later). The unemployment in many of the capital cities in the USA like Detroit, Chicago and Atlanta (to name only a few) are still doing it really tough. The economic divide between the rich (who understand demographic trends and take advantage of them) and the poor (who are more concerned about their daily needs) is getting greater. Unfortunately the unemployed,  poor and increasingly the middle classes are subject to crime, drugs, violence and murder on a daily basis and it's spiraling out of control. If you think Australia is immune from the demographic trends that affect the economy, your standard of living, you had better think again.

In addition, the Australia's economy is very dependent on the demographic cycles of other countries especially our major trading partners. The commodity boom over the past few years, which was mostly due to the changing demographic trends in China, resulted in the biggest boom in Australia's history. Now that that boom in China is definitely over how will the Australian economy survive?

The question to ask is -

  1.     Where are we in the "Spending Cycle" in Australia now and going into the next few years?
  2.     How will the imminent change in the spending trends of the Baby Boomers going to change Australia's economic growth rate?
  3.     How will spending trends of Generation X, Generation Y and the Millenniums change the economic environment?
  4.     Which country will replace China as the economic powerhouse?
  5.     Will Australia be able to take advantage of the economic growth in these new poorhouses?

In the the coming few weeks I will answer these questions and give you valuable insight on how demographics affect the BOOM-BUBBLE-BUST Cycle, Look out for the "Finance and Property Update",  which I email  every Friday. Please take the time to read it. Secondly, do not keep this valuable information to yourself. Feel free to forward my emails to your family, friends and colleagues. Australians need to prepare for the the coming BUST phase in the cycle and this email will be invaluable to them.  Believe me they will be most grateful.

If you want to protect your assets and take advantage of opportunities that will arrive in the coming BUST phase of the Boom-Bubble-Bust Cycle contact James Cagney on 0416 137 645 or click >>> HERE

This is not financial advice. You should not act solely on the basis of the material contained in this Property Update for your investment strategies. Changes in government and legislation occur frequently and without prior notice and financial markets are unpredictable.
Please note that the information herein is of a general nature only and is not intended as specific advice for any particular person or entity.

This information was written and compiled by James Cagney.  The opinions expressed herein do not necessarily represent the views and opinions of his associates including
Asset Finance Pty Ltd.

Author: James Cagney
Bookmark SiteTell a FriendPrintMarketing and Business Problems