Feeling the cost-of-living crisis? Charts reveal who’s getting off lightly, and who’s suffering most

Households have endured a sustained cost-of-living squeeze in 2023 that has changed the way we consume.

Stubbornly high inflation and rising interest rates have also put many family budgets under severe pressure, especially those carrying big mortgages.

The cost-of-living crunch has affected spending patterns.Credit: Natalie Boog

Five charts (below) reveal how spending has shifted amid the cost-of-living crunch and where financial stress is most acute. The analysis of spending patterns and research on consumer delinquency and hardship was compiled by credit bureau illion using credit and banking data from more than 18 million credit consumers.

Where households are cutting back

Elevated inflation, higher interest payments and a rising tax burden have weighed heavily on consumers. The latest economic report card published by the Australian Bureau of Statistics showed real household disposable income fell 4.3 per cent in the year to September 30 – the biggest decline since the 1980s.

In response, shoppers have cut spending on big ticket discretionary items such as electronics, furniture and other household goods.

The purchase of gadgets such as mobile phones, laptops and iPads has been especially hard hit.

Louis Tsang, illion’s head of analytics and data services, says spending on consumer electronics has been 40 per cent lower over the past six months compared with the same period in 2022.

“Instead of going for a technology upgrade, people seem to be saying, ‘Well, maybe I don’t need that this year,’” Tsang says. “I think there’s a lot more of that going on now.”

Purchases of household furnishings and equipment are down 12 per cent over the past six months compared with the same period in 2022, while spending at department stores is down 3 per cent. The illion data also shows spending on childcare fell.

Forking out for basics

The spike in inflation since early 2022 has forced households to spend a lot more on life’s basics, especially accommodation and fuel.

A standout has been the increase in spending on rents; illion’s data shows weekly rental payments over the past six months have been 12 per cent higher compared with the same period last year.

Health was another unavoidable expense that rose in 2023 – spending on health practitioners over the past six months has been 12 per cent higher compared with the same period last year. Tsang says increasing gap fees for medical services, such as visits to the GP, are one driver of the increase.

But we’re still going out

It’s not all bad news, though. Australians have not given up on their morning coffee or weekend brunch – illion’s data shows spending at cafes this year has been “comparable” with that of 2022. The same goes for spending at pubs and restaurants.

“People are giving up on some things, like bigger ticket items, but they don’t seem to want to give up on going out,” Tsang says.

More borrowers are stressed

The Reserve Bank lifted interest rates five times in 2023, making it 13 increases since May 2022. The bank’s official cash rate, which flows through to variable mortgage rates, is at a 12-year high.

So far, credit delinquency rates are relatively low, but pockets of financial strain are emerging. “It is clear that there is repayment stress,” Tsang says.

The share of personal loan accounts with at least one payment overdue jumped by 20 per cent in the year to September, from 2.63 per cent to 3.15 per cent, illion’s data shows.

Mortgage delinquencies, and the number of home loan borrowers seeking hardship arrangements with banks, have also risen. At the start of 2023, about 16,000 home loan accounts were under a temporary hardship arrangement. By October that had reached 23,000, illion’s analysis shows.

People aged between 36 and 45 account for the biggest share of home borrowers falling behind on repayments. “That’s no surprise,” Tsang says, since people in that age group have relatively large mortgages with high repayments.

Delinquency hotspots

Some urban regions have higher levels of mortgage stress than others.

In Sydney and Melbourne, the postcodes with the sharpest increases in the share of home loan accounts in arrears this year were mostly in outer suburbs. They include the Liverpool area in Sydney’s south-west and Cranbourne area in Melbourne’s south-east.

This table shows some hotspots for home loan stress.

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