Consumers reducing essential spending to prioritise travel while millennials feel the pinch: CommBank iQ
Commonwealth Bank of Australia’s (CBA) joint data science venture with Quantium, CommBank iQ, has launched its first Cost of Living Insights Report, revealing that those in their early thirties and renters are feeling the current cost of living pressures the most.
The report utilised aggregated and de-identified bank transaction data from 7 million CBA customers to track spending habits and understand how Australian consumers are responding to cost of living pressures .
Essential vs discretionary spending March 2019-2023
Discretionary spending remained elevated post-Covid, and while much of this was attributed to inflation, there was notable growth in expenditure on travel (up 39%), entertainment (up 10.8%) and eating out/food delivery (up 8.5%) in January to March 2023, compared to the same period last year. At the same time, spending on essential items barely grew in line with inflation, indicating that consumers are saving on everyday costs to prioritise experience, and perhaps make up for lost time during the pandemic period.
Stratifying the data by age, all age groups below 55 saw a reduction in expenditure in Q1 2023, compared to Q1 2022, while all groups over 55 reflected an increase in spending. The 25 to 29 age group experienced the steepest reduction in expenditure compared to other age groups.
However, speaking at a media briefing yesterday, the report’s author, CommBank iQ head of innovation and analytics, Wade Tubman, pointed to the dangers of averages, asserting that every group contains a range of behaviours.
“By looking at customers from many different dimensions we can start to tease out some of the behaviours that are happening here,” he said.
“What we’re seeing is a continued Covid rebound effect, with consumers catching up on the experiences that they missed out on during the pandemic. It seems counter-intuitive that at a time of increased cost of living pressures, consumers are choosing to boost their discretionary spending.”
Charting a number of lifestyle factors, Commbank iQ established that 30-34 years-olds were facing the greatest inflationary pressures, as were singles and couples without kids. Renters were also facing significant pressure, while homeowners and over 60s were on average not feeling the pressure of rising cost of living.
Tubman added: “Our Cost of Living Pressure Indicator shows renters are experiencing more pressure than homeowners in general. Despite the increased financial burden on some mortgage holders, a little under half of all homeowners are mortgage free and a third of those with a mortgage have savings buffers of two years or more.”
The report’s ‘Cost of Living Pressure Indicator’ – which measures changes in an individual’s total and discretionary spending – has risen sharply too and is positioned to increase further. This is accompanied by heat maps showing how this pressure is being felt across different areas of Sydney and Melbourne.
Sydney’s inner city, east and south west are under increased financial pressure
Melbourne’s inner and outer suburbs are experiencing the greatest cost of living pressure
You can view the full report on the CommBank website.
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