Retirees feasting on $450 million a day as super withdrawals thwart Australia's inflation fight

We have an inflation problem. The RBA has hiked interest rates several times already. But domestic inflation persists. Inflation is extremely persistent in services (3.7 per cent price growth in the last year) and it's even worse for non-tradables (4.4 per cent). To put it another way, as this Yahoo analysis breaks down, we particularly have a homegrown inflation problem. That means things that are made in Australia keep going up in price. Those are things where we have a capacity constraint. Thing where hot demand tends to show up as price hikes. RELATED The Reserve Bank of Australia has one tool at its disposal. Monetary policy. The bank hikes interest rates to try to squash high inflation and they cut interest rates to lever up low inflation. In the last year they have unleashed three rate hikes. Inflation has cooled a little. But there are real questions around how effective monetary policy is against inflation. Domestic demand remains strong. For example, discretionary consumption rose in the most recent national accounts data, and the household spending indicator is also showing a very healthy resilience. Boomers and the super gravy train: Retirees are feasting One answer: Super. We have heaps of super. The growth rate of super balances is about 10 per cent, running well above the growth rate of the economy (often 4 to 6 per cent in nominal terms). One of my favourite facts is that our super system now has more assets than our stock market. Which is why Australians are now owners of a lot of foreign stuff: American highways, European breweries, Asian manufacturers, our super owns (shares in) all of them. This vast pile of assets generates huge returns, so it can grow quickly while also ejecting enormous volumes of liquidity into our economy. The next chart shows the story. Australian retirees are feasting on super (note: the term pensions here refers to people taking fixed regular payments from super, not government pensions). Cash flows from the super system into the economy at about four times the intensity of 2010. We are looking at $40 billion a quarter, which is about $450 million each day. Some is funding consumption by retirees. Some is perhaps flowing via the 'bank of mum and dad' to fund property purchase by younger generations. Some will be going to pay off mortgages that are outstanding at retirement. All of which blunt the effect of monetary policy. The chart above shows $40 billion in payments coming out of the super system quarterly. It's a lot. Let's put it in context. As the next chart shows, interest on dwellings has shot up in rather terrifying fashion over the last five years as interest rates soared from zero. But super payments are still worth more. That is astonishing. It certainly shows how some households are tightening their belts while others are buying a new EV and jetting off to Japan. (Spending on new electric cars is one of the hottest categories in the economy right now, causing a big blip in the imports data.) Total household consumption is nearly $400 billion a quarter, so the super system can fund about 10 per cent of that. This means that as super grows, our ability to crush inflation with interest rate hikes will be blunted. And if superannuation is invested in cash, or assets whose returns correlate with the official interest rate, then higher rates will pump up the super system still more. Interest rate hikes depend, at least partly, on squishing the spending of households with debt. The data on whether that works is contested but it should work in theory, at least. Whereas for the well-funded retiree there is not even a theoretical reason to rein in spending. The Commonwealth Bank tracks spending by home-ownership status and they find that people whose home is paid off are spending in a healthy fashion. "Over the past year those that own their home outright have lifted spending in 10 out of 12 categories," write analysts from the bank in their July 2026 Household Spending Insights report. "Food & beverage goods, Recreation and Hospitality were the top three categories. This indicates that older households, who are more likely to be outright owners, were willing to get out and about." If super balances continue to shoot up, and super withdrawals continue to rise, yet more interest rates may have to fall on the shoulders of the segment of society with debt. And that's younger, working Australians.