Aussies spend up on holiday travel but saving is set to return

Key points of this story:

• Aussies households have been spending more.
• Holiday travel is the leading category of household expenditure. 
• Spending did slow significantly at the end of 2023, however.
• With high costs persisting, saving money might become more important this year.
• A good savings account is crucial to a successful savings strategy. 

Spending among Aussies has risen of late, led by spending on travel and gyms during the summer break, says CommBank. 

This was the conclusion drawn from the newly released CommBank Household Spending Insights (HSI) Index which rose 3.1 per cent in January.

Spending increased in nine of the index’s 12 underlying categories, with recreation spending (travel agencies, online travel bookings, airlines, cruise lines and fitness clubs/gyms) leading the way, up a significant 13.5 per cent in January after a 5.8 per cent decline in December. 

Household goods spending was up a strong 10.5 percent in January, but this did not fully offset the 15 per cent decline in December.

Modest increases were seen in Hospitality (+2.2 per cent), Education (+1.9 per cent), Communications and digital (+1.2 per cent), Utilities (+1.1 per cent), Insurance (+0.7 per cent), Health (+0.6 per cent) and Food and beverage (+0.1 per cent). 

Gains were also partly offset by reduced spending on Motor vehicles, Household services and Transport.

Is spending here to stay or are Aussies looking to cut back?

Some of these numbers seem surprising amid a high inflation environment where costs are generally up and interest rates have moved higher over the past 12 months. 

However, CommBank’s chief economist Stephen Halmarick said the rise in January continued the volatility seen in household spending over the summer months and did not fully offset the -3.5 per cent fall recorded in December 2023 (revised from -3.9 per cent on updated seasonal adjustment factors).

“The trend for Australian household spending is softening, with the bounce in January not enough to make up the declines from December,” Halmarick said.

“We expect to see an ongoing softening in consumer spending in coming months as the RBA November 2023 interest rate increase flows through to mortgage repayments and further constrains household budgets.”

According to some reports, Aussies have begun to save money in recent weeks.

For example, in its February statement the Reserve Bank noted that “high inflation, higher interest rates and tax payments have led people to cut back on spending.”

Also of interest was its comment that consumer demand has been higher than expected and “above the economy’s capacity to supply goods and services, which continues to put upward pressure on inflation.”

With inflation still an issue, business growth slowing and the job market looking more volatile, one might expect a tightening of wallets in the coming months.

How to get ahead on your savings in 2024

Improving your savings isn’t solely dependent on reduced spending however, but choosing a good savings account with a higher level of interest. The trouble is, many Aussies don’t quite understand the ins and outs of savings products and could be potentially missing out on earning more money on their hard earned cash. 

A 2023 report by the Australian Competition and Consumer Commission (ACCC) found that a large number of people actually miss out on higher savings interest rates because their bank makes it too complicated to compare products or fail to make it clear that they’d be better off switching accounts.

The ACCC also highlighted the significant difference in interest earnings that a customer can make by meeting certain savings account conditions. Conversely, failing to meet such criteria can result in a dramatically lower base interest rate and much lower savings earnings over the long term, as explained in our article on the ACCC's findings.

At Mozo, our experts seek to make this task much easier for savers. They analyse the savings account market and handpick some of the very best accounts available for you to consider. Be sure to check out our high interest savings account hub for more or simply start comparing some top savings rates below.