Australians are prioritising their discretionary spending on travel and entertainment over other categories such as household goods and clothing.
This is according to the latest CommBank iQ Cost of Living Insights Report, which has revealed that travel and entertainment spending are the only discretionary categories to record above-inflation growth for the last quarter - at 8.2 per cent and 8.6 per cent respectively - compared to an 8.1 per cent decrease in household goods spending.
Meanwhile, essential goods and services, such as insurance, medical costs and pharmacies, are up - but well below inflation - while overall discretionary spending was flat.
Those aged 25-29 have been the hardest hit, the report found, with a 5.1 per cent decline in their total spending – the only age group to decrease both discretionary and essential spending.
The age group decreased spending on household goods by 17 per cent, with apparel spending down 10 per cent and retail services down 9 per cent.
Despite a pullback in discretionary purchases, those in their twenties continued to find room in the budget for entertainment experiences - up 13 per cent.
“Leaving room in the budget for experiences is a continuing trend,” CommBank iQ head of innovation and analytics Wade Tubman said. “However, they are having to reduce spending in other areas.
“We’re seeing consumers in their twenties cut back spending but still leave room to fund experiences. We’ve also seen younger people redirecting discretionary spending from things like clothes and homewares, to spend on cinemas and ticketed events such as concerts and sport.”
The report uses spending data for the September 2023 quarter compared to the same period in 2022. The latest results confirm that, despite interest rates remaining on hold through the period, many Australians are feeling more pressure from rising living costs.
“Given the most recent rate rise, it will be interesting to continue to monitor these trends, as we expect to see a dampening of the post-COVID experience spending preference,” Tubman.
The report also reveals a divide in spending by geography, with spending by Australians in regional areas outpacing those in metropolitan areas.
On average, regional Australians have grown their spending at 2.9 per cent for the quarter, more than double metropolitan consumers at 1.2 per cent, with housing costs cited as a contributing factor.
The gap between regional and metropolitan areas was most prominent in New South Wales and Victoria.
“We’ve seen lower or negative discretionary spending growth in metropolitan New South Wales and Victoria where many people are grappling with higher rents and mortgages,” Tubman said.
Consumers under 40, who are more likely to be restricted by mortgage and rental costs, decreased year-on-year spending in the September quarter.
Older Australians are proving more comfortable with the only above-inflation total spending growth seen in those over 70.
While discretionary spending went backwards for consumers under 55, those over 55 have increased their purchases this quarter, compared to last year.