Young Australians cut back on essentials while Baby Boomers spend freely
The spending gap between young and old Australians is growing, a new report reveals
The spending gap between young and old Australians is growing, a new report reveals
Younger Australians in their mid-to-late-twenties have cut back on spending more than any other age group, while Baby Boomers aged over 65 years continue to spend above inflation, according to the latest CommBank iQ Cost of Living Insights Report. Those aged 25-29 years have reduced spending by 3.5 percent compared to last year, and they’re the only age group to have cut back on both essential and discretionary expenses.
CommBank and artificial intelligence company Quantium use de-identified payments data from CBA’s seven million customers every quarter to evaluate how Australians are spending their money and responding to today’s higher costs of living. One of the strongest trends is Australians reallocating more of their funds to cover essential expenses such as groceries and insurance and cutting back on discretionary items like apparel.
However, young Australians aged 25 to 29 are the only age cohort cutting back on essentials as well as discretionary items. During the March quarter, they spent 10 percent less on health insurance than they did in the March 2023 quarter, with CommBank saying this was the result of a 12 percent reduction in the number of people having coverage. They spent 7 percent less on utilities, 4 percent less on supermarket groceries and 3 percent less on insurance. The national trend encompassing all age groups was the opposite. Examples include a 3 percent increase in spending on groceries and an 8 percent increase on insurance.
“Compared to the national experience, where most people have had to increase spending on essentials, we are seeing the opposite trend amongst those in their twenties, with essential spending falling at a similar rate as discretionary,” said CommBank iQ Head of Innovation and Analytics Wade Tubman.
“This highlights the difficult choices people in this age bracket are making, with some having to make larger lifestyle changes like foregoing their health insurance altogether. The decrease in utilities spending could also suggest young Aussies are moving back in with parents or into shared accommodation to split costs.”
The average Australian is spending 3.6 percent more on essentials at an average of $1,472 per month, led by an 8 percent increase on insurance, 5 percent on medical and pharmacy, and a 3 percent bump on utilities, supermarket groceries and transport.
“Many Australians are having to allocate more of their wallet to essential living expenses, rather than other areas where they may prefer to direct their spending. The cost-of-living initiatives announced in the Federal Budget, for example the energy bill rebate, reflect the increased spending by Australians on essential items like energy,” Mr Tubman said.
The data showed continued growth in spending among Baby Boomers. “The wide gap in spending patterns across age groups continues to persist, with Australians in the 60 and older age bracket spending above inflation, especially on activities like travel, which is up 11 percent, general retail up 9 percent and eating out, up 7 percent,” Mr Tubman said.
The data shows that the older Australians are, the more money they are spending. Those aged 75-plus are spending 6.5 percent more at $2,408 per month. Those aged 70-74 are spending 5.1 percent more at $2,762 per month. Those aged 65-69 are spending 4.4 percent more at $3,253 per month and those aged 60-64 are spending 3.7 percent more at $3,331 per month. At the other end of the scale, Australians aged 25-29 are spending 3.5 percent less at $2,099 per month and those aged 30-34 are spending 0.6 percent less at $2,568 per month.
Australians living in regional areas are holding up better amid today’s high cost of living.
“While spending in regional areas continues to outpace that of metro areas, this gap has narrowed when compared to previous quarters. This raises the question whether people in metro locations have downsized their wallets to adjust to higher prices, and what spending growth remains is now ‘the new normal’,” Mr Tubman said.
Spending was most resilient in Queensland, the ACT and South Australia. The data shows per capita spending on travel and other discretionaries in Queensland was higher than the national average. Interestingly, both Queensland and South Australia have the fastest-growing retiree populations in Australia. Data just released by the Bureau of Statistics shows Queensland saw the highest increase in retiree residents between FY21 and FY23while South Australia saw the largest rise in the proportion of its population that is retired.
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The bank posted unaudited cash earnings for the quarter of A$1.7 billion, down 2% on the average of its prior two quarters
National Australia Bank said that higher credit impairments against business loans contributed to a small fall in its unaudited December quarter cash earnings.
NAB , which is Australia’s second-largest bank by market capitalization, on Wednesday posted unaudited cash earnings for its fiscal first quarter of 1.74 billion Australian dollars, equivalent to about US$1.11 billion.
That was down 2% on the average of its prior two fiscal quarters. NAB did not give a year-earlier comparison.
The lender said that revenue grew by 3% compared with the average of its prior two fiscal quarters. Underlying profit growth of 4% over the same period was offset by higher credit impairment charges and income tax expenses, it added.
NAB, which posted an unaudited quarterly statutory profit of A$1.70 billion, said the A$267 million credit impairment charge included A$152 million of individually assessed charges. Those were mainly against Australian businesses and unsecured retail portfolios, it said.
The individual charges were up by 54% compared with a year earlier. NAB said that it had not altered its economic assumptions and scenario weightings.
“The economic outlook is improving but cost of living and interest rate challenges persisted,” Chief Executive Andrew Irvine said. “While most customers are proving resilient, we have maintained prudent balance sheet settings.”
NAB said it had seen a small decline in net interest margin due to funding costs, lending competition and deposits, partially offset by the benefit of higher interest rates.
On Tuesday, the Reserve Bank of Australia cut the country’s cash rate for the first time since 2020 but warned against expecting subsequent near-term cuts.
NAB is still targeting full fiscal-year productivity savings of more than A$400 million, and for operating expenses to grow by less than 4.5%, Irvine said.
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