Australia’s great divide in spending as young tighten belts harder

Spending on travel, leisure and eating out is rising much faster for one key age group, new Commonwealth Bank numbers show.

Young adults have cut back their monthly spending more than any other age group while older Australians are buying up big.

A new analysis of spending by seven million consumers shows people aged 25-29 were the only group to reduce spending on both discretionary items and essentials including insurance, utilities and groceries in the year to March 31.

Meanwhile, Australians aged over 60 increased their overall spending at a rate greater than inflation, particularly in areas such as travel and eating out, according to the new CommBank iQ Cost of Living Insights report.

“The life stage of Australians significantly influences spending patterns, with younger Australians still bearing the brunt of cost-of-living pressures,” says the report, which uses de-identified payment data from Commonwealth Bank customers.

Overall, people spent an extra 3.6 per cent on essentials last year, for a monthly average of $1472, and 1.4 per cent more on discretionary items, averaging $1386 per month.

But 25-to-29 year olds cut their total spending by 3.5 per cent – including a 7 per cent drop in utilities, 4 per cent drop in supermarkets and 3 per cent drop in insurance. People aged 30-34 also cut their spending in 2023, down 0.6 per cent.

CommBank IQ head of innovation and analytics Wade Tubman said young adults were “skewed heavily into the early stages of their housing journey” and had been hit hard by rising rents and mortgage repayments.

“That then has downstream impacts on their spending in other areas,” he said.

For example, while overall insurance spending rose 8 per cent last year, 25-to-29 year olds spent 10 per cent less on health insurance, suggesting that some were dropping it altogether or moving back home to be on their parents’ family policies, Mr Tubman said.

They were also prioritising some areas of discretionary spending, he said.

“While they’re shrinking their wallets, they’re choosing some areas to shrink more than others. For example, cutting back on household goods, for young people that’s down 10 per cent, everything from TVs to furniture, and they’re cutting back on apparel.

“They’re letting their clothes run another season, but are increasing their spending in entertainment including sporting events, movies and concerts.”

Spending growth among senior Australians increased the more they aged, ranging from 3.7 per cent for 60-to-64 year olds up to 6.8 per cent for people aged over 75.

Over-60s spent 11 per cent more on travel, 9 per cent more on general retail and 7 per cent more on eating out.

“On average the older generation are less impacted by rentals and mortgages – the proportion of older people that own a home outright is a lot higher,” Mr Tubman said.

The CommBank IQ report also found that regional Australians had increased spending more than metro areas.

Housing’s impact on overall spending is illustrated by research by comparison website Mozo.com.au that found Australians have collectively spent $60bn more on their mortgages since the Reserve Bank started raising interest rates in 2022 – money that could have otherwise gone elsewhere.

Mozo banking specialist Peter Marshall said younger people were more vulnerable because they often earned less, and a bigger proportion of their wages went into housing costs.

“They also have less in savings or investments to draw from to help top up their income than older Australians,” he said.

It’s not enough anymore to just pull back on discretionary income to make ends meet. It requires a whole-of-spending review to find extra money right now and that means looking for ways to save on everything from groceries, transportation through to nights out with friends.”

Originally published as Australia’s great divide in spending as young tighten belts harder