Cost of Living Insights Report reveals spending behaviour changes

CommBank iQ is a new joint venture between Commonwealth Bank of Australia and data science and AI company Quantium, which uses aggregated and de-identified payments data from 7 million CBA customers to track spending behaviours and trends. The Cost of Living Insights Report, released earlier this week with up to date data right through to May 2 this year shows that discretionary expenditure remains elevated post-Covid, while spending on essential items is barely growing in line with inflation driven costs.

The author of the report, CommBank iQ Head of Innovation and Analytics Wade Tubman explained that consumers aren’t necessarily shopping more, rather costs have risen and consumers don’t have a choice other than to decrease spending in other, less essential areas. The report identifies that people are reducing spending across a variety of categories, particularly goods areas as they prioritise experiences. Household goods are down 11.6 percent on 2022, and the spend on apparel is down 4.3 percent.

Tubman also notes that in a somewhat ‘counter intuitive’ move, some consumers are spending big on travel to make up for lost time over lockdown. He explains that, “some customers are drawing down on savings buffers they accumulated during COVID-19. For others, they are choosing to be frugal in some areas so they can continue to prioritise experience.” According to Commbank’s data, travel spend has increased 39 percent on the same time in 2022, a time when there were little to no travel restrictions in place across the country.

“Putting our expenditure under the microscope shows we’re responding to the increased cost of living in diverse and sometimes unexpected ways,” comments the report’s author CommBank iQ Head of Innovation and Analytics Wade Tubman. “What we’re seeing is a continued Covid rebound effect, with consumers catching up on the experiences that they missed out on during the pandemic. It seems counter-intuitive that at a time of increased cost of living pressures, consumers are choosing to boost their discretionary spending.”

There is a clear divide in spending patterns based on age groups with older consumers increasing their expenditure and younger ones drastically cutting back. According to the data, spending by those aged over 35 has increased by 7.7 percent, which almost doubles the 3.4 percent increase in spending by those under 35.

Tubman notes that while young people are choosing to go out less, their average spend on these occasions has increased.

“The cost of living pressure score has started to rapidly pick up since Christmas and certainly the trends are that financial pressure will continue to rise,” concluded Tubman. “The Reserve Bank’s decision to increase the cash rate by 0.25 percent to 3.85 percent on 2 May will add to these pressures.” The Cost of Living Insights Report cautions that looking ahead, the lagged effect of higher interest rates and mortgage costs is expected to further increase cost of living pressures and soften consumer demand.

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