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Older Australians are spending more on everything from travel to eating out, while younger people are cutting back even on essentials such as groceries and electricity bills, as the growing generational wealth divide threatens to turn into a chasm.
A report from CommBank iQ, a joint venture between the Commonwealth Bank and data firm Quantium Group, has found that the spending gap is widening between younger and older Australians, with those in their mid-to-late-twenties most affected by relentless price rises.
The 25- to 29-year-old cohort cut their spending by 3.5% in the March quarter compared with last year. When inflation is added, consumption shrank more than 7%, with spending in almost all categories including essential items falling.
“For these Australians, a cutback in travel, household goods and apparel expenditure was paired with lower spending on supermarkets and utilities,” the report said.
Rising interest rates and high living costs have had a disproportionate impact on Australians, with younger people facing high rents and education costs and those who recently acquired mortgages feeling the brunt of the economic cycle.
The spending cuts mean more younger Australians are reducing or getting rid of insurance coverage altogether and finding ways to save on electricity, gas and water bills.
“It’s possible that’s because more people are moving back in with parents, into shared accommodation, or delaying plans to leave home,” the report said.
Older Australians who are largely debt-free often benefit from elevated rates through increased interest on their savings accounts. In response, those over 65 have been spending at above inflation levels, with travel expenditure up 11%.
Overall, Australians spent more on eating out during the March quarter, compared with a year earlier, but there has been a shift in dining habits.
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Fast food purchases were up, while spending at cafes and casual dining restaurants fell, which is likely linked to people switching to more affordable eating options.
The report shows that while spending is still contracting, as it did last year, the pace has started to slow. This could be because spending cuts are losing momentum or consumers don’t have enough room left in their budget to continue cutting back at the same rate, the report found.
“In both scenarios, cost-of-living pressures and confidence aren’t materially improving yet,” the report said.
“With inflation sticky and prices elevated, consumers are still charting a course through higher costs of living.”
Australia’s inflation rate slowed less than expected in the March quarter as rents and education costs increased, lessening the chances of an imminent interest rate cut and dimming hopes the period of fast-rising living costs is subsiding.
