Australians are freeing up more of their wallet for discretionary purchases with a focus on value and convenience, according to the latest CommBank iQ ‘Cost of Living Insights’ analysis.
Overall spending continues to trail inflation, up by just 1.5% compared to the same time last year.
Young Australians continue to feel the pinch more than any other age group with those aged 18-29 cutting back on spending by 2% over the past year, with a notable decline in both essential (down 2.3%) and discretionary (down 1.9%) spending.
In the past 12 months, 30- to 39-year-olds have also recorded negative overall spending growth, with a 1.1% drop in essential spending and 1% drop in discretionary categories.
By contrast, those aged 60-69 increased spending by 3.9% and over 70s by 7.7%.
“Lower petrol prices and government energy relief programs have eased the pressure on essential spending and July’s income tax cuts have increased take home pay for many Australians, however there continues to be a discrepancy between the spending power of older and younger Australians,” says CommBank iQ Head of Innovation and Analytics Wade Tubman.
“In fact, we’ve seen those all the way up to 40 years-old cut back on spending, highlighting the large swathe of the population feeling cost of living pressure.”
Essential spending
Spending on the essentials has halved in the past year, down to 1.7%, as the share of wallet between essential and discretionary spending is now nearly equal ($1383 per capita per month vs $1379).
The slowdown was driven by decreases in petrol prices (down 6%) and reduced utilities spending (down 3%).
Conversely, spending on insurance (up 10%), medical and pharmacies, (up 7%), and education (up 6%) continued to rise.
Value and convenience
A 5% increase in spending on the ‘general retail’ category over the past year was driven by convenience and cheaper alternatives. This was driven by increased spending on online marketplaces (up 20%).
Spending on food delivery (up 6%), streaming services (up 13%), and discount stores (up 6%) also rose.
“Cost-conscious Australians continue to make trade-offs in the current environment,” says Mr Tubman.
“The fact that spending has increased on food delivery and streaming services suggests consumers are foregoing meals out to treat themselves at home.
“Consumers are also opting for discount purchases online, reflecting an environment of belt-tightening.”