Frugal Aussies are making the hard choices

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Perspectives on spending

  • Consumer trends: We are travelling less, buying fewer cars, spending more on insurance and winning the battle on high electricity and gas budgets. But we are using public transport and services like Uber more often, cutting back a bit on gambling and buying more clothes. The findings are obtained by analysing the detailed household spending figures published yesterday in the National Accounts.
  • Consumer Spending: Over the year to September, the average family spent an extra $38 a week compared with a year earlier while income rose by almost $62 a week. Aussie families spent less on nine of 28 categories including cars, furniture, trips overseas and utilities like electricity and gas.
  • Biggest areas of spending: Paying the rent or mortgage costs the average family just over $420 a week with food accounting for $205 of the average weekly budget followed – somewhat surprisingly – by insurance (and other financial services) with outlays almost $200 a week.

Consumer spending trends data is important for all consumer-focussed businesses as well as financial providers.

What do the figures show and what does it mean?

  • Household incomes spiked higher in the September quarter due to the tax cuts being paid. And consumers promptly saved most of it. Many families needed to, because up to then, many families were running down savings so they could maintain spending. The question is whether the ‘saving’ was just a strategic decision, awaiting the sales events in November and early December.
  • What we do know is that for the full 12 months to September, disposable income for the average Aussie family rose by around $39 a week, and most of that was spent. Saving was actually cut back by just over $2 a week so people could maintain their existing spending.
  • Over the past year, Aussie families spent more on housing rents and mortgages ($8.53 a week), followed by insurance ($6.93), food ($6.26) and train and bus fares ($3.35 a week). Add in the total spending on health (an extra $5.58 a week) and it is clear that these areas hardly fill consumers with joy. Thus the low levels of consumer confidence.
  • Aussie families spent less on overseas travel ($5.81 a week) over the past year as well as cars ($2.08 a week) and utilities like electricity ($1.30 a week).
  • The good news is that the pressure on electricity and gas retailers is working, with prices falling 1 per cent over the past year. In addition we are turning off lights and using appliances less with energy usage down by 0.6 per cent over the year.
  • Perhaps part of the cutback on car purchase reflects a switching to taxis, Uber, public transport and ride-sharing services as spending on transport services rose by $3.35 a week) over the past year.
  • Due to lower prices, Aussies were able to cut back on spending of mobiles and other telco devices. The slowdown in home building saw Aussie families spend less on fridges, washing machines and things like furniture and carpets. And the savings in these areas allowed people to channel spending in other areas.
  • Aussies also cut back on gambling (by 62 cents a week) and newspapers & books (by 61 cents a week). In response we spent more on alcohol (up 44 cents a week) and clothes and shoes (up $2.08 a week).
  • Whether it reflects the ageing population or not, Aussies spent around 6 per cent more on health over the past year or an extra $5.58 a week. Medicines account for an extra $2.78 a week and health services like physios cost an extra $2.80 a week.

 

 

Is the importance of the economic data?

  • The quarterly National Accounts from the Australian Bureau of Statistics provides data on household spending in real terms (volumes) as well as current prices. The data enables investors to monitor trends over time and assess the performance and outlook of numerous businesses.

What are the implications for interest rates and investors?

  • Consumers have welcomed the tax cuts and interest rate cuts as the measures have allowed people to rebuild savings without sacrificing their standard of living in a significant way.
  • Aussies have saved, not spent, the tax cuts – at least so far. Anecdotal evidence suggests that some of the dollars were spent at recent sales events.
  • The performance of consumer spending will be important for future decisions on fiscal and monetary stimulus.

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