Aussies Spending More on Luxuries Despite Claiming to Cut Back

I’ll start the diet on Monday…

How many times have you said these same words to yourself? I’ll start the diet / start exercising / drink less / eat less ‘bad’ food / save a bit more?

Reflecting on our economy, I can’t help but think we’re seeing this play out, in real time, with our wallets – and ‘Monday’ might just be the new year.

We know that interest rates are rising, inflation is increasing – yet we’re also seeing spend on dining out, travel and entertainment increasing too… why is this happening?

Vibrant wanted to explore this topic a bit further, so we engaged Fonto to bring it to life.

Fonto, through their data assets, have access to daily financial behaviour of over 40,000 Australian consumers. We looked back over the past 12-24 months of spend behaviour. This are real people – actual financial history, not just claimed data. Here’s what we’ve learned:

• With COVID restrictions largely in the rear-view mirror, basket sizes have shrunk a small amount since the same time last year – with more trips.
  • Perhaps the primary shopper is shopping more often and searching for specials, more often, to stretch their dollar further? There’s no doubt an element of more frequent shops meaning fresher ingredients.
• Aldi continues to command a greater share of basket (value seeking), while IGA falls (as much as we love local, it can be expensive). So we’re helping our dollar go further.
• Despite rising interest rates and wider inflation, people are spending more on dining out, travel and entertainment than any point in the last 2 years. This is jarring.

Why might Australians be spending more?

Firstly – we’re still recovering from an ‘unprecedented’ 2 years: many Australians couldn’t socialise, travel, engage in leisure, and watched as the world spiralled out of control under the burden of rising COVID cases.

Secondly – open up our media feeds, and we’re bombarded with negative news: ongoing war in Ukraine, rising energy prices, shortages, political turmoil locally and abroad.

Third – we are bracing for rising inflation, and increased cost of living (whether you have a mortgage, or rent, you’re probably going to see your shelter costs increase).

With this continued assault down the bottom of Maslow’s Hierarchy of Needs, it’s no surprise that we’re chasing the next dopamine hit.

Throw in a healthy dose of Diderot effect (where as people spend on new things, their spend increases and becomes a self-feeding loop), and it’s no surprise we’re seeing consumer consumption increase, despite economic pressures, and discount countless surveys that talk to consumers claiming to cut back.

The question is whether what we’re seeing is the last big ‘hurrah’ in consumer spend: sandwiched between a rough few years of COVID/war in Ukraine and looking inflationary pressures and rising housing costs, we could be forgiven for finding a little bit of happiness, and deciding to start the financial diet on Monday (after the holiday season). Or is this simply the new normal – in the face of overwhelming negativity, simply kicking the can down the road as long as possible to enjoy the good times while we’re here? Or are we seeing a multi-speed economy play out?

So what’s next?

Well, a lot of this is connecting the dots based on what we’ve seen and know of consumer psychology.

Watch this space, as Vibrant and Fonto interviews these individuals whom we know are increasing their spend on discretionary goods & services to uncover the ‘why’