Young Australians slash insurance spending as seniors increase costs
Young Australians slash insurance spending as seniors increase costs | Insurance Business Australia
Insurance News
Young Australians slash insurance spending as seniors increase costs
Differences of regions’ spending patterns also revealed
Insurance News
By
Roxanne Libatique
Australians in their mid-to-late twenties are reducing their spending more than any other age group, while those over 65 continue to spend above inflation rates, according to the latest CommBank iQ Cost of Living Insights Report.
The report found that individuals aged 25 to 29 have cut their overall spending by 3.5% compared to last year, making them the only age group to reduce both essential and discretionary expenses. When adjusted for inflation, their consumption has dropped by over 7% since May 2023. This includes a notable 10% reduction in health insurance spending.
Reduction in health insurance spending
The reduction in health insurance spending underscores the tough choices faced by young Australians, some of whom are opting out of health insurance entirely.
“These cuts include a 10% drop in health insurance, a 7% drop in utilities, and a 4% decrease in spending at the supermarket. This highlights the difficult choices people in this age bracket are making, with some having to make larger lifestyle changes like foregoing their health insurance altogether,” Tubman said.
Australians’ essential living expenses
Nationally, essential spending rose by 3.6%, with insurance costs increasing by 8%. Australians now spend an average of $1,472 per month on essentials, driven by higher expenditures on insurance, utilities, pharmacies, and groceries.
“Many Australians are having to allocate more of their wallet to essential living expenses, rather than other areas where they may prefer to direct their spending. The cost-of-living initiatives announced in the Federal Budget, for example the energy bill rebate, reflect the increased spending by Australians on essential items like energy,” Tubman said.
Widening gap in spending patterns
Discretionary spending saw a modest increase of 1.4%, largely driven by Australians over 60. This age group has been spending above inflation, particularly on activities such as travel, retail, and dining out.
“The wide gap in spending patterns across age groups continues to persist, with Australians in the 60 and older age bracket spending above inflation, especially on activities like travel, which is up 11%, general retail up 9%, and eating out up 7%,” Tubman said.
Regional spending patterns
Regional Australia exhibited stronger spending growth compared to metropolitan areas, with a 3% annual increase compared to 2.3%. Consumers in regional areas doubled their discretionary spending compared to those in metro areas (2.4% versus 1%).
“While spending in regional areas continues to outpace that of metro areas, this gap has narrowed when compared to previous quarters. This raises the question whether people in metro locations have downsized their wallets to adjust to higher prices, and what spending growth remains is now ‘the new normal’,” Tubman said.
On a state-by-state basis, spending was most robust in Queensland (up 3.3%), followed by the Australian Capital Territory (ACT) at 3.1% and South Australia at 2.9%.
“In the Sunshine State, discretionary spend per capita on things like travel was higher than the nationwide average. While further south, Victorians have tended to reduce their spending more significantly than others when it came to homewares and apparel and didn’t increase spend as much on travel, leisure, and eating out,” Tubman said.
CommBank iQ is a joint venture between the Commonwealth Bank of Australia and Quantium, a data science and AI company. It uses de-identified payments data from about 7 million CBA customers to monitor spending trends.
With many Australian households struggling with current cost-of-living pressures. CommBank is offering support through various initiatives. The CommBank Cost of Living Support Hub, for example, provides tools, tips, and guidance to help customers navigate these financial challenges.
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