Cost-of-living pressures are biting, but one generation is splashing out

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Retired Australians enjoying higher interest rates on savings accounts are spending big on holidays and dining out, while under 30s have drastically tightened the purse strings as cost-of-living pressures bite.

High interest rates and inflation don’t affect all Australians equally. A report by CommBank iQ shows over-65s spent at a greater rate than inflation over the year to September 30, while people under 40 reduced spending. Those aged 25 to 29 made the most drastic changes to their budgets.

High interest rates and inflation don’t affect all Australians equally.Credit: Digital artwork: Stephen Kiprillis

Wade Tubman, head of innovation and analytics at CommBank iQ, said there were clear differences in spending across generations.

“The younger you are, the more you’re contracting spending. And conversely, the older you are, the more that you’re able to spend,” he said.

Time to travel for cashed-up retirees

While home buyers face increasingly large mortgage repayments – a household with an average $600,000 mortgage will be paying nearly $1600 extra a month when this month’s rate rise is added to those since May last year – a third of Australian households own their homes outright. The majority of those homeowners are retirees.

For many over-65s, higher interest rates have also helped swell savings balances. And for those without home loan repayments or rental pressures, that’s meant more money to spend.

Over-65s increased their overall spending by 6 per cent year-on-year, above the 5.2 per cent lift in inflation over the same period.

While this group had faced growing medical and insurance costs, Tubman said it had also significantly increased spending on travel, including flights, cruises and package deals.

Tubman said evidence showed older Australians were tighter with spending during COVID-19 and returned to travelling much later than younger groups.

“The data suggests they’re catching up on experiences a bit later than everyone else. But equally, they’ve got the discretionary spending power to be able to do it,” he said.

In the past year, over-65s increased their travel spending by 19 per cent and lifted their outlays on dining out or takeaway by 11 per cent.

Deloitte Access Economics head Pradeep Philip said many older Australians had a bit more money to spend after working hard, putting off holidays and saving up.

“They’re going overseas, they’re spending money on their grandkids, they’re spending in the economy,” he said.

Young people spent money on leisure activities, including the Matildas at the Women’s World Cup.Credit: Getty

‘Barbenheimer’, Matildas the bright spot for younger Australians

At the opposite end of the spending spectrum are 25- to 29-year-olds, many of whom were facing rental costs for the first time after moving out of home.

As a consequence, they were the only age group to pull back on essential spending (down 3.7 per cent) as well as discretionary purchases (down 6.2 per cent).

While they slashed spending on household goods, clothing and retail services, Tubman said the one area bucking the trend among younger people was entertainment.

“Younger people are continuing, despite the pressures, to focus their wallet around experiences,” he said.

While they reduced spending on household goods and clothing, they splashed out on entertainment as the Barbie and Oppenheimer blockbusters (dubbed “Barbenheimer”) simultaneously hit cinemas and helped drive a 31 per cent increase in movie ticket sales.

“Part of that is that it is a cheaper form of entertainment,” Tubman said.

“Certainly around the time that Barbenheimer came out, we saw a dramatic increase in cinema expenditure.”

Interest in the FIFA Women’s World Cup and the Matildas’ matches also helped lift event ticket sales by 18 per cent, as did upcoming concerts such as Taylor Swift’s Australian tour.

Philip said pressures keeping younger Australians at home for longer, such as higher rents, meant some of them had more room for those sorts of experiences.

“More of them are staying at home … which is allowing them to afford things like $900 Taylor Swift tickets,” he said.

Tubman said all under-40s reduced their spending in the face of rising costs. But where they lived had a major impact, with those in metropolitan NSW or Victoria hit the hardest.

Young people are choosing to live at home to be able to afford things like tickets to Taylor Swift.Credit: AP

Higher costs, but more financial freedom for Gen X

Sandwiched in the middle are the Gen Xers, who are spending more than a year ago in dollar terms, but are buying less when inflation is taken into account.

Tubman said the 40- to 64-year-old cohort had picked up spending for several reasons – incomes peak later in careers, but so do household expenses. While this group might be faced with high rents or mortgage repayments, many had the benefit of savings.

“As you start to step through the age groups … you get progressively more ability to flex your wallet in response to the cost of living,” he said.

“They do have some of those buffers that allow them to make less drastic changes to the expenditure patterns.”

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