Australians are cutting back their spending on nice-to-haves as well as essentials to afford higher rents, analysis of transaction data shows.
Renters hit with a 10 per cent increase recorded a 3.4 percentage points decline in discretionary spending as captured by Visa’s Australian spending momentum index.
The index, which charts the number of people in spending mode, also recorded a sharper 5.1 per cent fall in discretionary spending for debit card-holding renters.
The same group were also found to be pulling back on non-discretionary goods, with the index declining 3.5 per cent.
Visa chief economist Wayne Best said it was unsurprising to see households cutting back as rents were going up.
“The first place that typically gets cut back is discretionary items, things that are nice to have,” he told AAP.
Though a slowdown in spending on non-discretionary items – essentials items – showed how higher rents were really starting to hurt consumers.
“And that’s a concern as you look forward, until we see some break in rent prices, and given the supply and demand issues that are associated with it in Australia, that’s going to take a while,” Mr Best said.
Households hit with big rent increases may be struggling but when all consumers were factored in, the payment processing firm’s spending momentum index for August revealed a larger share of Australians spending compared to a year ago.
The index lifted 5.7 points to 100.5, with discretionary and non-discretionary rates improving.
Mr Best said it was too early to suggest the trend to more cautious spending was shifting, with the year-on-year measures potentially influenced by muted spending during the flooding events last year.
© AAP 2023