NAB research shows consumers still spending on hobbies, children, pets

NAB’s latest research shows consumers are still spending on children, pets and hobbies as cost of living pressures mount, but are pulling back on coffee, holidays and big-ticket items.

The NAB Consumer Sentiment Survey says about four in 10 consumers have made ‘thoughtful’ adjustments to their budget, including making fewer car trips, cutting down on coffees and lunches bought outside the home and cutting back on entertainment plans.

Australian consumers are pulling back on non-essential spending in areas such as takeaway food and coffee, holidays and big-ticket items, but continue to spend on their children, pets and hobbies as cost-of-living pressures mount, new research from NAB shows.

The NAB Consumer Sentiment Survey, released on Monday, says about four in 10 consumers have made “thoughtful” adjustments to their budget, including making fewer car trips, cutting down on coffees and lunches bought outside the home and cutting back on entertainment plans. About a third of consumers are also cutting back on holiday plans, food deliveries and have cancelled or delayed a major household purchase.

NAB group executive personal banking Rachel Slade said rather than embarking on a full-scale belt-tightening regimen, it appeared consumers were being more discerning about where they spent their money.

“Australians are now making small but thoughtful changes to their purchases to keep on top of increasing costs,” Ms Slade said.

“People are prioritising the things that matter for right now and spending less on big-ticket items like travel or holidays, home improvements and major household purchases, as well as eating out and entertainment.”

Aussies are spending less on takeaway coffee due to cost of living pressures. Picture: iStock

More consumers were also reporting switching to less expensive products to save money.

“Consumers are still buying, but what they spend their money on must be worth the investment,’’ the report says.

“Consumers are splurging less and spending more on essentials and necessities like utilities and groceries.’’

While consumers were cutting back on “micro-treats’' such as takeaway coffees, goods and services associated with the family and wellbeing were proving resilient. “Consumers were less inclined to cancel or cut back spending on private school fees or tutors, children’s activities such as sport, dance and hobbies, spending on their pets, outsourcing home services such as lawn mowing and house cleaning, insurance and gym, sports or club memberships,’’ the report says.

Perceived value for money was also more important.

“A lot of this behaviour has come from easier access to information and options consumers discovered as they moved online during the pandemic,’’ the report says.

“As a result, online reviews have grown in importance, affecting purchasing decisions and business visitation.’’

The NAB Consumer Stress Index, up 0.8 at 56, remains “comfortably below’’ the survey average of 58.5. Stress associated with the cost of living increased to a 4½-year high of 67.7 points, up 0.2 for the quarter. The NAB Consumer Stress Index ranges from 0-100 with the high end of the scale indicating “extreme concern”.

“Cost-of-living pressures continue to be a key pain point for consumers, with the level of consumer stress related to these pressures currently at a multi-year high and trending above survey average levels in nearly all demographic groups,’’ the report says.

Ms Slade said while there was concern around rising interest rates and cost-of-living pressures, this was moderated by low unemployment, which gave people confidence in their own employment and their prospects of finding a job should they need to.

“The thing that Australians are worried about the least is job security and I think that provides confidence and support as they’re looking to the future,’’ she said.

“They’re not worried about a situation where they don’t have a job.’’

This might explain the willingness to spend in areas such as fitness, pets and family, which might see cutbacks if the employment outlook was more precarious.

NAB is predicting a 25 basis points increase in official interest rates when the Reserve Bank of Australia meets on Tuesday this week.