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Renters’ tight finances drive household spending slump

By Juliet Helmke
14 May 2024 | 7 minute read
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The latest data on consumer trends from the Commonwealth Bank includes new information about how spending differs depending on home ownership status.

The bank reported that its monthly CommBank Household Spending Insights (HSI) Index fell 1 per cent in April to 148.11 in seasonally adjusted terms, down from a peak in January 2024 of 149.7. This puts annual spending growth for the year at the sluggish rate of 2.6 per cent.

Digging into the spending categories, the bank found that spending on essentials like education (+3.7 per cent), utilities (+2.5 per cent) and motor vehicles (+1.7 per cent) rose in the month, while discretionary items were put on hold. Food and beverage (-3.8 per cent), hospitality (-3.3 per cent) and recreation (-2.6 per cent) all dragged the index down. Spending across all discretionary categories recorded a 4.4 per cent drop in April.

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And for the first time, CommBank tracked the difference in spending depending on home ownership status: home owners who own outright, home owners with a mortgage, and renters.

The bank found that renters were the cohort that pulled back on purchases the most. Their spending has grown only 1.3 per cent annually, compared with mortgage owners who increased their spending by 4.5 per cent, and outright owners who were up 6.3 per cent.

However, the spending that home owners are doing appears to be somewhat less by choice. In both owner cohorts, insurance, utilities and health costs crowd the top areas to which they’re financially contributing.

Owners with a mortgage reduced their spending on hospitality, household services and food and beverage goods, while outright owners increased their hospitality spending but also pulled back on household services and food and beverage goods.

Renters, meanwhile, typically spend less on housing-associated costs of insurance and utilities, as well as health. Though they often devote a larger proportion of their wallets to hospitality and food and beverage goods, those categories dropped back over the year, as did their spending on recreation and household services.

Breaking spending down by the states, Victoria continues to be a weak spender, with purchasing power across the region down 1.2 per cent for the month and up just 1.9 per cent for the year. South Australia (+0.3 per cent), Tasmania (+0.3 per cent) and NSW (+0.1 per cent) have showed spending resilience over the month, while Tasmania is now the strongest spending state growing at 4 per cent annually.

CommBank chief economist Stephen Halmarick said the fall in April reflects an ongoing trend with housing costs at a high.

“The April HSI paints a picture of a constrained consumer following an early Easter bump in March. Significantly, the annual rate of household spending has fallen from 3.9 per cent in March to 2.6 per cent in April, led by a large drop off in discretionary spending, which is down 4.4 per cent in the month,” Halmarick said.

“We can see from the new Home Ownership Insights included in this month’s report that renters in particular have cut back, with spending just inching higher at 1.3 per cent over the year, while those who own their home outright experienced the strongest spending growth at 6.3 per cent annually.

“We expect weak consumer spending and below-trend economic growth to continue throughout 2024, and despite recent inflation data surprising to the upside, we anticipate the RBA will cut interest rates in November this year,” he noted.

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ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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