Spending the inheritance: Boomers splurge on dining, travel as young people cut back on essentials

Retirees have increased spending on everything from insurance to travel, while Millennials and Gen Z are pulling back on essentials as cost-of-living pressures continue to disproportionately affect younger households.

Cost-of-living insights from CommBank iQ found 25- to 29-year-olds reduced their spending by 3.5 per cent in the first three months of this year compared with the same period last year, and cut back on essentials including utilities, insurance and groceries.

Older Australians have continued to increase their spending, while younger people have been forced to cut back on essentials.Credit: Digital artwork: Stephen Kiprillis

CommBank iQ’s head of innovation and analytics, Wade Tubman, said once inflation had been taken into account young people had pulled back their spending by more than 7 per cent.

“What we’re seeing now is younger people are cutting back, not just their discretionary spending, but also their essential spending,” he said.

Those 25- to 29-year-olds reduced their spending on utilities by 7 per cent, supermarkets by 4 per cent, insurance by 3 per cent and cut travel and household goods spending by 10 per cent. Their spending on health insurance also fell by 10 per cent.

Tubman said there were roughly two groups of young people: those who had decided things such as health insurance were important, and those who decided they would drop the likes of health insurance altogether, which led to the 12 per cent fall in the proportion of young people with coverage.

“That doesn’t mean they’re not covered altogether: that could be that they’ve moved home, they’ve moved back onto their parents’ policy,” he said, suggesting a similar thing could be occurring with energy bills.

At the other end of the spectrum, older Australians increased their spending in all categories, except charities.

“Insurance, medical and utilities are some of the really key categories for older people, and they have seen significant rises in them,” Tubman said.

People aged over 65 increased spending on insurance by 10 per cent, while spending on utilities was up 4 per cent. They increased their grocery spend by 5 per cent.

Older Australians have also significantly increased their spending on dining out (up 7 per cent) and travel (up 10 per cent); Tubman said it was the second year of seeing significant spending increases in those categories for over-65s.

“Some of the older generation aren’t facing those same pressures that younger people are facing, and so despite the fact they may or may not like the fact that those costs have gone up, they have the means to lean into them,” he said.

Tubman said the data aligned with the Commonwealth Bank’s recent household spending insights, which found that renters, who are typically younger Australians, had increased their spending by 1.3 per cent over the year to April, while those with mortgages had increased their annual spend by 4.5 per cent, and households who owned their homes outright increased spending by 6.3 per cent.

Separate figures from the Australian Bureau of Statistics showed older Australians were continuing to return to work after retiring, but a decreasing proportion did so to help make ends meet.

About 162,000 people rejoined the workforce in 2022-23 after retiring. KPMG urban economist Terry Rawnsley said the proportion of retirees picking up work again for financial reasons was easing, from 32 per cent in 2019-20 to 29 per cent in the current year.

“This decrease hints at an improving financial landscape for retirees and a shift in motivations for re-entering the labour market,” he said.

“We are seeing a growing inclination among retirees to return to work out of a desire for engagement and opportunity.”

Overall, Australians increased spending by 2.5 per cent in the first three months of this year compared with the same period last year, while inflation rose by 3.6 per cent.

But Tubman said these shifts in spending were easing, and after a few years of sustained cost-of-living pressure, households appeared to be resetting their wallets.

“What we’re starting to see is that consumers have made those changes over the last 12 to 18 months, and we’re at a new norm now,” he said.

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