Revealed: How Australians are austere while the cost of living rises

The worst cost of living pressures in two decades are forcing Australians to make major changes to their spending habits, a new report reveals.

Food deliveries, online subscriptions and gym memberships are among the first things to be cut as households tighten their belts, the latest consumer data from the National Australia Bank shows.

And the highest inflation since 2001 is also leading to a range of lifestyle changes, including fewer “micro-treats” like snacks and long-awaited vacation plans that get postponed or cancelled.

“Consumers are not only noticing price increases (particularly in grocery, transportation and utility spending), but are changing their spending and lifestyle patterns in an effort to address them,” said NAB economists Dean Pearson and Robert De Lure.

Unsurprisingly, consumers in the lowest income brackets were much more likely to cut spending than other households, with 40 percent admitting to diving into their savings to save themselves until payday.

NAB said consumers will feel the strongest cost increases in supermarkets, followed by transportation and energy bills, although more than half say eating out has also become more expensive.

Those perceptions are broadly consistent with official inflation data, which found prices rose 5.1 percent year-on-year in Marchled by rising gasoline prices.

Just under half (46 percent) of consumers surveyed said they would reduce their driving to avoid higher petrol costs

But one type of hip pocket pain that hasn’t been reflected in official data yet is utility bills.

Having electricity prices started to rise latelywith net 59 percent of NAB survey respondents saying they already feel the pressure.

In response, 48 percent of consumers said they were cutting back on their electricity use and making sure they turned off appliances and lights.

Other supplies such as groceries also express householdswith more than half of shoppers (54 percent) switching to cheaper brands or taking the extra time researching the best prices.

Prices of food and alcoholic drinks shot up 2.8 percent in the March quarteraccording to ABS data, including a 6.6 percent increase in vegetable prices and a 4.9 percent increase in fruit costs.

These higher prices for basic necessities such as food, petrol and power are also forcing Australians to cut back on discretionary purchases.

That can be seen a lot in recent data on consumer spending and confidence, but it was also reflected in NAB’s research.

About 43 percent of shoppers are cutting back on food delivery apps like UberEats, while 40 percent are spending less on entertainment.

About a quarter (26 percent) said they have now cut back on the gym or sports.

Such large-scale spending cuts are ominous because, as Reserve Bank governor Philip Lowe said this week, inflation has not yet peaked.

According to the latest projections from the RBA, inflation will worsen through the remainder of 2022, reaching a peak of 7 percent year-on-year by the end of the year.

After that, price growth appears to slow as global issues such as shipping delays are gradually resolved – although high commodity prices will keep prices high for other essentials, such as gasoline and power, for some time.

ANZ Bank data released on Thursday showed consumer spending was “slow” in June, although senior economist Adelaide Timbrell said fiscal year-end spending will be key later in the month.

“We’ll have to wait and see if spending increases in the last week of June,” she said.

“If EOFY’s sales disappoint, we may have a delay on our hands.”

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