Younger Australians in their mid-to-late twenties have significantly reduced their spending more than any other age group, according to the latest CommBank iQ Cost of Living Insights Report.
In contrast, those over 65 continue to spend at rates above inflation.
The report reveals that those aged 25-29 have cut their spending by 3.5% compared to last year.
This age group is unique in cutting back on both essential and discretionary expenses.
When accounting for inflation, their consumption has decreased by more than 7% compared to May 2023.
While most Australians have reallocated their budgets to cover increased costs of essentials like insurance, medical, and supermarket spending, those aged 25-29 have decreased their spending on both essentials (-3.1%) and discretionary items (-3.8%).
Wade Tubman, Head of Innovation and Analytics at CommBank iQ said:
“Compared to the national experience, where most people have had to increase spending on essentials, we see the opposite trend among those in their twenties, with essential spending falling at a similar rate to discretionary."
These cuts include a 10% drop in health insurance, a 7% drop in utilities, and a 4% decrease in supermarket spending.
This highlights the tough choices people in this age bracket are making, with some even foregoing health insurance.
The decrease in utility spending could also suggest young Aussies are moving back in with their parents or into shared accommodation to split costs.
Nationally, spending increased by 2.5%, with essentials up by 3.6%.
Consumers are now spending an average of $1,472 per month on essentials, driven by higher spending on insurance (+8%), utilities (+6%), pharmacies (+6%), and supermarkets (+5%).
Tubman explained:
“Many Australians are now allocating more of their budget to essential living expenses rather than other areas where they may prefer to spend.
The cost-of-living initiatives announced in the Federal Budget, such as the energy bill rebate, reflect this increased spending on essential items like energy.”
Discretionary spending rose by just 1.4%, led by continued growth in spending by Australians over 60.
“The wide gap in spending patterns across age groups continues, with Australians over 60 spending above inflation, especially on activities like travel (up 11%), general retail (up 9%), and eating out (up 7%),” Tubman noted.
Across the country, regional Australia continues to fare better than metro areas, with a 3% annual increase in spending compared to 2.3% in metro areas.
Consumers in regional areas have more than doubled their discretionary spending compared to those in metro areas (2.4% versus 1%).
Tubman further said:
“While spending in regional areas continues to outpace metro areas, the gap has narrowed compared to previous quarters.
This raises questions about whether people in metro locations have adjusted their budgets to cope with higher prices, and whether this spending growth represents a new normal."
On a state-by-state basis, Queensland showed the most resilience in spending (+3.3%), followed closely by the Australian Capital Territory (+3.1%) and South Australia (+2.9%).
Tubman added:
“In Queensland, discretionary spending per capita on items like travel was higher than the national average.
Meanwhile, in Victoria, residents have cut their spending more significantly on homewares and apparel and haven't increased spending as much on travel, leisure, and eating out.”
