Consumers are more mindful about budgeting, data shows
Consumer stress has once again increased as cost-of-living concerns lifted to a record high since late 2018, with Australians becoming more careful about how and where they spend their money, according to the latest NAB insights.
The NAB Consumer Stress Index rose to 56.6 points in Q1 2023, from 56 in Q422, as cost-of-living stress climbed 1.2 points to 68.9. But overall, the index continued to trend comfortably below the 10-year average of 58.5 points, with low job stress providing a key offset.
Some 29% of consumers reported “very high” levels of stress arising from cost of living (90+ points). By income, 37% of low-income earners and 23% of higher income groups said they were experiencing very high cost-of-living stress. Living costs were also plaguing consumers who are renting, with 40% of house renters reporting very high cost-of-living stress.
“Most consumer confidence measures have [been] plumbing levels historically consistent with severe economic downturns – albeit they have recently risen,” said Alan Oster (pictured above), chief economist at NAB. “Yet for some months, spending has remained resilient but may be slowing now. Consumer confidence typically is not well correlated with consumers spending, but what is different to previous periods of very weak consumer confidence is consumers remain upbeat about their work prospects.”
Job security continued to cause the least consumer stress, with just one in 10 consumers reporting very high job stress (90+ points) – that’s around half the level posted when COVID-19 broke out in early 2020.
When it comes to health, consumer stress levels eased to a well-below-average level of 54.8 points in Q1, from 55.6 points the prior quarter. Concerns over the ability to fund retirement, meanwhile, remained unchanged at 58.1 points, below the survey average. There was, however, a significant rise in consumer stress due to government policies, rising to 59.1 points in Q1, from 56.1 the previous quarter, though still well below the survey average of 63.4 points.
By state, SA and NT registered the highest consumer stress at 59 points, followed by NSW and ACT with 58.1 points and Victoria, 57 points. In Tasmania, consumer stress was at 50 points, while WA and Queensland posted 53.8 points and 54.4 points, respectively. Women (57.3 points) continued to experience higher stress than men (55.8 points), although the gap narrowed in Q1. Stress also remained higher among those aged 30-49 (60.2 points), earning $35-50,000 p.a. (59.3 points), the unemployed (66.5 points), renters (60.6 points houses, 60 points apartments), households with children under 18 (59.1 points), and with three or more people (58.8 points), the NAB survey found.
“Consumers typically extrapolate changes in the overall cost of living based on the price changes that draw most attention – i.e. things consumed most regularly (e.g. utility bills, petrol and groceries),” Olsen said. “Consumers continue to report price rises across all these areas (on balance 73% of consumers said grocery prices were higher in Q1 2023, compared to 58% of consumers 12 months earlier).
With mortgage rates continuing to rise through the early part of 2023, net 62% of consumers said their mortgage costs had risen – triple the number the same time a year ago (21%). There was also a rise in medical expenses (58% vs. 49% in Q422), and spending on children (46% up from 37%).”
In response to the surging cost-of-living pressures, consumers were making some key changes in what and how frequently they buy. Some were cutting back or stopping their purchases of treats such as coffees, snacks, or lunches (45% vs. 42% in Q4 2022), while others were cutting back on car journeys to save petrol (42%) and entertainment, such as going to the cinema or theatre (41%). There were those too who have cancelled, delayed, or made more modest holiday plans (35%), or cancelled or cut back on food delivery services (34%) and charitable giving (32%).
Interestingly, Australians remained most reluctant to make cutbacks on private school fees or tutors, children’s activities such as sport, and spending on pets.
To keep on top of increasing costs, Australians have also become more mindful where they spend money (on balance +44% vs. +40% in Q422, with +34% of consumers switching to less expensive products, and +22% becoming more informed by researching brands and product choices before buying.
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