Young Australians are reining in their spending more than other age groups and even cutting back on essentials.
Spending by people aged 25 to 29 on must-haves, such as groceries and pharmaceuticals, fell 3.7 per cent over the year to September, based on Commonwealth Bank payments data.
Discretionary purchases sank by 6.2 per cent for this group, with the demographic more likely to be renting and experiencing sharp hikes in housing costs.
Those in their thirties and forties – and likely to be paying off a mortgage – were also spending less than older generations but their belt tightening was less severe than for those in their twenties.
The CommBank iQ head of innovation and analytics Wade Tubman said young people were found to be cutting back on things like homewares and clothes to save their pennies for entertainment, including films and sporting events.
Many young people are spending big on entertainment by cutting back elsewhere.
“We’re seeing consumers in their twenties cut back spending but still leave room to fund experiences.”
This was a trend observed across all demographics, with travel spending up 8.2 per cent and entertainment purchases up 8.6 per cent.
“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,” Mr Tubman said.
The spending slowdown recorded over the quarter was most pronounced in the major cities, which had experienced the sharpest increases in rents and mortgage costs.
Regional areas were generally spending more than their city counterparts, reflecting higher housing costs for urban households.
Total year-on-year spending per person was growing but more slowly than inflation was increasing.
This was true across all age groups except retirees, where spending grew a little faster than prices were increasing.
Those over 65 recorded a 17 per cent increase in travel spend and an 11 per cent lift in spending at restaurants and cafes.
Older Australians are more likely to be mortgage free and benefiting from higher interest rates on their savings, with consumer confidence surveys revealing less pessimism among those who own their homes outright.
The weekly ANZ and Roy Morgan survey of consumer confidence has been stuck deep in negative territory though it did improve a modest 0.4 points last week.
Those paying off a home loan have been the most worried about the economy and their finances, with renters and outright home owners experiencing shallower declines.
The decision to lift interest rate by another 25 basis points at the November meeting of the Reserve Bank board will pile more pressure on this cohort.
Further insights into the call will be revealed on Tuesday when the RBA releases the minutes from the meeting.
A panel appearance from RBA governor Michele Bullock may shed more light on the central bank’s assessment of the economic conditions, and the likely trajectory for interest rates.