Households are still slashing spending ... even on essentials

As cost-of-living pressures and interest rates have continued to squeeze households, Australians have been tightening their belts. While some of these spending cuts suggest households have been trimming fat from “nice-to-have” categories such as eating out and alcohol, other cuts were in necessary items such as food.

Younger Australians in particular have been whittling down their spending, while older, more affluent demographics have continued to splash their cash.

Households aren’t stowing away their cash

Despite slashing their spending, households aren’t seeing their savings stack up. The household saving-to-income ratio compares the amount people are saving to the amount they are earning, with lower values indicating people are saving less of what they earn.

The ratio has been sitting at 0.6 for six months, which is the lowest it has been – except for the September 2023 quarter – since the global financial crisis. Of the income households have been bringing home, most of it is being spent, and very little stowed away for a rainy day.

Some states are feeling the crunch more than their neighbours

Economic growth has been bumpy across the economy. In the June quarter, all states and territories, except NSW, saw state final demand (demand for goods and services within the state) step up. The measure doesn’t include international and interstate trade, but gives an idea of how much households, businesses and government in each state are spending and producing.

Western Australia and South Australia experienced the strongest growth in state final demand as Western Australian households spent more on utilities, household equipment and recreation, and South Australia got a boost from government spending. Meanwhile, state final demand slipped into reverse for NSW (down 0.4 per cent) as households cut spending on hotels, cafes, restaurants, transport services and vehicle purchases.

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