Australians are making significant adjustments to their spending patterns as the cost of living rises, with younger demographics cutting back on both necessities and non-essentials.
At the same time, the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) is highlighting the critical role of insurance in managing financial challenges during this period.
The latest CommBank iQ Cost of Living Insights report indicated that overall consumer spending rose by only 1.5% year-on-year, failing to keep pace with inflation.
Young adults aged 18 to 29 reduced their total spending by 2% in the past year, including a 2.3% decrease in essential expenses and a 1.9% drop in discretionary outlays. Similarly, individuals aged 30 to 39 cut essential spending by 1.1% and discretionary purchases by 1%.
Older Australians, however, increased their spending. Those aged 60 to 69 boosted spending by 3.9%, while people over 70 recorded a 7.7% rise.
Wade Tubman, head of innovation and analytics at CommBank iQ, said young Australians – particularly those under 40 years old – continue to face financial strain despite lower petrol prices and government energy relief programs.
“We’ve seen those all the way up to 40 years-old cut back on spending, highlighting the large swathe of the population feeling cost-of-living pressure,” he said.
Spending on essentials rose by just 1.7% over the year, a marked slowdown from earlier growth rates.
Australians now allocate nearly the same amounts per month to essential and discretionary items, spending an average of $1,383 and $1,379 per capita, respectively.
Declines in petrol prices (-6%) and utility bills (-3%) were key factors in the reduced growth of essential spending. However, certain categories experienced increases, including insurance (+10%), medical and pharmacy expenses (+7%), and education (+6%).
Discretionary spending showed a shift toward value-based choices. Online marketplace spending surged by 20%, driving a 5% increase in the broader “general retail” category.
Expenditures on food delivery grew by 6%, streaming services by 13%, and discount retailers by 6%, as households focused on cost-effective and convenient alternatives.
As financial pressures mount, ANZIIF has emphasised the importance of maintaining insurance coverage to protect against unexpected costs.
It warned that cutting back on insurance to save money may expose households to significant risks.
“Unfortunately, when households are under financial stress one of the first places people seek savings is with their insurances. This is when insurance brokers and financial advisers can understand the needs of their clients and ensure their clients obtain the right cover,” the organisation said.
