It’s a Lowe story: Shaking off inflation just got harder

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As Australian inflation remains stubbornly high, Reserve Bank Governor Philip Lowe now has another economic phenomenon to grapple with: Taylor Swift.

Based on recent international events, it’s possible the mega-star’s recently announced concerts in Melbourne and Sydney could cause some champagne problems for Lowe in the fight against inflation.

Reserve Bank Governor Lowe now has another economic phenomenon to grapple with: Taylor Swift.Credit: AP, Louise Kennerley

Earlier this month Beyonce’s Renaissance tour was blamed for higher-than-expected Swedish inflation, as fans scrambling to secure accommodation caused prices to surge around the country. The “Beyonce Effect” appears to have spread to the United Kingdom as debate rages over whether UK inflation failed to fall in May, partly because of admission prices to her Cardiff concert.

“Beyonce is responsible for the extra upside surprise this month,” Danske Bank’s Chief Economist told the Financial Times, estimating that 0.2 percentage points of the inflation rise could be attributed to the concerts.

The jury is still out on whether “Swift-flation” (Taylor’s version) will be seen in Australia, or if our figures will shake it off.

“A similar effect may not be observed because by early 2024 the economic backdrop is expected to weaken in Australia from the impacts of prior interest rate increases,” says Diana Mousina, deputy chief economist at AMP Capital.

The demand elasticity of Swifties is something economists can’t imagine even in their wildest dreams.

“This should mean that there will be lower demand for accommodation and restaurant and takeaway foods, which were areas that benefitted from Beyonce’s performance in Sweden.”

Normally, when inflation runs persistently high, consumers cut back. However, spending hits different for Swifties, with economists observing consumers are still splashing out on expensive but fun experiences despite surging prices.

Swift’s tour of Australia could either be an inflation anti-hero or the “T-shaped” recovery we need to avoid a cruel summer, as hospitality and tourism stand to benefit from the unrivalled spending power of her fans.

Here in the US, the economic impact has been all too well documented. Dubbed by analysts as the “TSwift Lift”, hotel revenues have reportedly more than quadrupled when she comes to town. In Chicago, she set a record for hotel bookings and generated an extra 43,000 bus and rail rides, while Cincinnati is expecting to see $US48 million in spending and the creation or support of 1000 jobs as a result of her two concerts.

Forecasts suggest the US economy will see an extra $US5 billion in spending because of the tour. For context, the Australian Open generated approximately $400 million last year, so that’s almost 20 AusOpen’s to one US Eras tour.

The economic phenomenon that is Swiftonomics is also teaching young people more about supply and demand, monopoly behaviour and free markets than any economics professor could hope for.

The demand elasticity of Swifties (where demand remains high even as prices rise) is something economists can’t imagine even in their wildest dreams, with fans spending on average $US1300 to attend her concerts. According to Bloomberg, tickets that were originally sold for as little as $US49 are going for more than $US1500 in reseller apps.

Ryan Vazquez, an animator from Los Angeles and Taylor Swift fan.

Last November Ryan Vazquez, an animator from Los Angeles, purchased tickets to no less than three of her concerts across the United States. He spent a total of $US1176 for five tickets, but says if he wanted to, he could sell them “at current reseller prices for $US10,690”.

That’s over an 800 per cent return in roughly seven months, something not even the stock market can achieve. Vazquez also spent an additional $US1500 on airfares, accommodation, Ubers and merch.

Swifties are an enchanted bunch and not afraid to take advantage of other countries’ relatively high inflation and low exchange rates, flocking to all corners of the globe at the prospect of cheaper tickets. Aussies will be competing with the likes of US fans who recently took advantage of Argentina’s 100 per cent inflation to nab $US153 tickets.

A quick search of hotel rooms around the MCG and Accor stadiums shows prices are already in the “higher than usual” category if not already booked out. Based on average ticket prices multiplied by the capacity of the MCG and Accor Stadiums, across the five shows a back-of-the-envelope calculation suggests an approximate $55 million take for Taylor.

“It’s possible that it will show up in inflated airfares around the concert dates into those two cities as fans from other states rush to book tickets,” says Shane Oliver, chief economist at AMP Capital.

Conversely, Swift could also make a strong case to be the next RBA Governor due to her legendary powers to fight inflation. If you think back to December, when egg prices were surging, Swift said she and her fans would “get on it”. Guess what has happened? Egg prices have fallen ever since. Surely not a coincidence.

Of course, only time will tell if there will be a Swift-induced afterglow in the February inflation print, but even if there is, this journalist can confidently say “Swift-flation” will be transitory without risking my credibility.

Tickets go on sale to the public this Friday, but some bad blood has already been spilled in the presale, meaning if you don’t act fast the chances of getting one for yourself are as likely as snow on the beach. Are you ready for it?

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