Consumer Pulse Report 2023

December, 2023

Canstar’s seventh annual Consumer Pulse report identifies Australians’ financial pain points and debt levels, savings habits and investment goals, plus the impact of cost of living pressures.

Monday, 11 December 2023 – More than three-quarters of Australians are complaining they haven’t felt any relief this year from the cost of living pressures, according to the seventh annual Consumer Pulse Report from Canstar.

The Report reveals the nation’s biggest financial pain points and debt levels, savings habits and investment goals, plus the impact of cost of living pressures on homeowners, mortgage holders and renters, based on the opinions of 2,072 Australian adults. 

The national findings released today show a lucky 17% of Australians have gained some relief from cost of living pressures this year. The main cause of this is changing behaviours to cut costs (70%), followed by experiencing lower bills due to price cuts (27%) and one-fifth (20%) have increased their income this year.

However, the vast majority, that is 76% of Australians, have not felt any relief, with most (81%) putting this down to their bills staying the same or even increasing. One-third (33%) say it’s because they haven’t been able to cut costs, 17% say their income has decreased and 2% put it down to other reasons. 

Inflation is trending downwards, according to the Australian Bureau of Statistics (ABS) monthly Consumer Price Index, but it is not expected to fall within the Reserve Bank’s (RBA) target range for some time.

Only one in two (50%) Aussies have confidence in the RBA’s and government’s ability to ease inflation in 2024, and looking back, this has dropped from 56% who had faith inflation would ease this year.

Canstar’s finance expert, Steve Mickenbecker says, “Only one in every two Australians feels the cost of living crisis will ease in 2024, with men more optimistic than women – 56% versus 46% – and the youngest generation, Gen Z, having greater faith than any other generation.”

“Having spent two decades largely below three percent, inflation’s breakout in 2021 and 2022 caught Australians by surprise. Memories are short and people have forgotten just how sticky inflation can be and are disappointed that the Reserve Bank and government haven’t beaten it in a year.

“Home loan interest rates have long been the tool of choice for dealing with inflation but they only work because they inflict pain on the community. Belt tightening slows inflation and we are certainly seeing this now as loan repayments and higher prices for everything cut buying power and lifestyles.

“Australia has beaten double-digit inflation in the past and stepping on it fast is the key to avoiding drastic action and the intense pain needed to return from that place.”

Price of groceries beats out housing costs as the biggest money worry for 2024

Aussies’ grocery spend is in the spotlight following the call for a Senate inquiry into claims of price gouging from the major supermarkets amid the current cost of living crisis. 

The cost of the weekly supermarket shop remains the biggest financial concern for Aussies heading into next year. This is the fourth consecutive year that the price of groceries has topped the list of money worries with it this year sitting above rent and mortgage interest rate movements, and well ahead of the cost of electricity and gas, and petrol prices.

The price of groceries is the top concern for one in five (20%) Australian adults, rising from being the top concern for 7% of people when the Canstar Consumer Pulse Report series began in 2017. 

According to the research, Aussies spend on average $186 per week or $806 per month on groceries.

However, this cost is a far cry from the national median weekly rent of $588 or $2,548 per month, according to CoreLogic’s Quarterly Rental Review in October 2023. It’s also a lot less than the $3,578 monthly repayments required to repay a $600,000 loan over 30 years based on the median variable rate of 5.95% that owner occupier mortgage holders say they are paying on their loans at the time of the Report. 

Mickenbecker says, “The cost of groceries is top of mind for concerns as it hits every wallet every week. But for renters and mortgage payers, rises in the cost of housing dwarfs the weekly grocery bill. The Report highlights it’s possible to make savings on both big ticket items and everyday living costs.”

“Savings can come out of everyday spending, with a savvy 13 percent of Australians managing to cut their grocery costs by buying less, buying cheaper alternatives and shopping for discounted items. But savings won’t be enough for borrowers unless they can also refinance into the lowest interest rate they can. Renters may have to move or find someone to move in with to cut their housing cost.”

Living costs biting as Aussies say they will struggle to pay their bills in 2024

The impact of higher living costs sees close to half (48%) of Aussies anticipating they will be unable to pay at least one of their regular bills or loan repayments in 2024. 

There is a  major discrepancy between the 55% of females who anticipate being unable to pay at least one of their usual outgoings and males at just 39%. A divide also exists between those with children versus those without, with 63% of households with dependents anticipating struggling to pay compared to only 43% of households without dependents.

Despite many Aussies worrying about meeting regular financial commitments next year, the threat of higher living costs and another potential interest rate rise, 56% feel they are living within their means financially and are spending less than they earn, saving regularly and limiting their debts. 

However, the percentage of people feeling they are living within their means has declined since 2020 when it was 73%.

“Getting our finances organised is the way to deal with the increased cost of living, and the starting point is to work out how much cash comes into the household and where it goes, then cutting the non-essentials to eliminate any shortfall,” says Mickenbecker. 

“Interest rate cuts are looking unlikely until the end of 2024 and waiting for a rate reprieve will only see cracks in the household budget widen. During the past year, 21 percent of mortgage holders negotiated a better rate and 9 percent switched lenders and by following this lead it effectively brings your own rate cut forward. 

“There can be huge savings from switching providers for other big-ticket bills, like insurances, electricity and internet. Canstar’s Cost of Living Comparison shows Aussies could potentially save $12,741 by switching from the average to the cheapest or top-rated offers.”

The amount of debt Aussies carry has dropped despite cost pressures

Just over two-fifths (42%) of people don’t have debt that’s separate from a property loan, which is down slightly from 43% last year. However, it’s worrying to see that 26% don’t know how much debt they have. 

For almost one-third (32%) of Aussies who know how much debt they are saddled with, the amount owing has drastically fallen. In 2019, Aussies were carrying an average of $48,809 in debt, which has subsided over the four years to an average of $8,981.

One in 10 Aussies report that they’ve been able to reduce their debts this year with the main reasons being spending less on discretionary items (30%), generating more income (19%) and rounding out the top three is lower living costs (16%).

Mickenbecker says, “Credit cards remain the biggest debt trap for Aussies. Currently, there is $17.27 billion in personal credit card debt accruing interest in this country, which has risen by almost 3% year on year, according to the latest RBA Credit and Charge Card statistics.”

“If you’ve run up debt in the past year on your frequent flyer credit card you’ll be paying way too much interest, up around 20 percent, and it’s time to switch to a low rate card.

“Cutting spending is the prime way to slash costs and avoid racking up debts. It can be hard when you think you’ve cut back everything you can. Once you’ve been over every line item in the budget and there’s nothing left in the tank, it’s important to look for ways to supplement your income. On-demand work has paved the way for Aussies to dial up their incomes when needed.”

Higher living costs stifling savings goals

Worryingly, only half (51%) of Aussies are stashing away money each month, which is a massive drop from 77% last year. The average amount Aussies are saving each month has also dropped from $393 in 2022 to $316 in 2023. That’s less than half of the $671 they were popping into their piggy banks in 2021!

The big ticket item Aussies are saving for isn’t a big surprise with living costs topping the list for the fourth consecutive year. This was followed in equal second place by saving for a rainy day and a holiday. 

What stood out in this year’s Consumer Pulse Report is the younger generations putting off plans for holidays and purchasing cars to meet living costs and save for a house.

The impact of living costs in 2023 has delayed the savings goals for 70% of Aussies. This reaches as high as 79% of women compared to 60% of men. Almost one-quarter (23%) are still achieving their savings goals and the remaining 7% are unsure if their savings goals have been delayed or not.

It’s Millennials who have felt the impact of higher living costs the most when it comes to their savings goals with 85% of young savers saying their goals have been delayed as a result of higher everyday expenses. The youngest generation, Gen Z isn’t far behind with 77% saying their savings goals have been impacted by higher living costs compared with 66% of Gen X and just 57% of Baby Boomers.

“Aussies are saving less than they have been able to in previous years as cost pressures decimate the ability to put money aside. The main item or expense currently being saved for is living costs followed by a rainy day fund,” says Mickenbecker. 

“Recession mentality has snuck into the Aussie psyche, with saving for survival today and providing for a rainy day coming up as the prime savings motivations. The economy might be at full employment and property prices booming but people are fearing worse to come. 

“Aussies continue to have their sacred cows, the lifestyle things they are reluctant to give up on to achieve their savings goals. Travel is at the top of the list and life’s parties are also seen as a must, with celebrating milestones in second place followed by dining out, buying gifts, and even spending on booze features on the must-do list, all washed down with the ubiquitous takeaway coffee.”

Over one-third of mortgage holders are unprepared for today’s higher interest rates

Mortgage holders have been battling higher loan repayments for over a year and a half. More than one-third of homeowners (34%) and investors (38%) say they’re not prepared for mortgage interest rates to remain at the current level into next year before potential rate cuts start.

This is just to maintain repayments at the current amount and doesn’t even account for any further rate increases that could eventuate if the RBA increases the cash rate again to tame stubborn inflation.

Explains Mickenbecker, “With rate cuts looking to be at least a year away, it is disturbing to find that more than one-third of mortgage holders say that they are not prepared for interest rates at the current level running into next year.”

“Even more worrying is that borrowers who say they can’t afford repayments account for one in five of intended property sellers over the next two years. This might provide some relief for property market undersupply, but not the relief we would welcome.

“The pace of interest rate increases has left many borrowers in shock, and as the deepest pain is likely being felt by recent buyers with their larger mortgages they would have no experience of this financial stress. There is no badge for suffering in silence, but there can be for seeking out support and advice from trusted sources. Borrowers know what they went through to buy their first house and should not be giving up on it easily.

“Most borrowers are in a reasonable financial state and refinancing continues to be an option. However, just 21 percent have been able to successfully negotiate a better rate with their lender and only 9 percent have switched lenders to chase a better deal. This leaves most borrowers in a situation where they likely haven’t taken action to cut their repayments.”

Majority of renters struggle to meet other expenses as rents rise 

The rental crisis and inflation are causing rents to rise with 63% of the nation’s renters reporting an increase in their rent this year by an average of $59 per week.

Most (65%) of renters now paying more are struggling with other living expenses and are seriously looking at cutting back spending. Almost one-fifth (18%) are having to look for cheaper rental accommodation, which will be a struggle in some markets where vacancy rates are tight. One in ten have moved to a shared house (6%) or moved back with their parents (4%) to pay cheaper rent. 

“The good news is that one-fifth of renters experiencing higher prices are thankfully in a position to afford the increase. But for how long?”, says Mickenbecker. 

“Rental demand will be bolstered by owners giving up on repayments and selling, along with continued migration, and higher rents that make saving to buy more challenging and keeps first home buyers in the rental pool for longer. 

“The shortage of rental supply is only going to get worse and it will be a while before the four in ten Australians who would consider buying an investment property in the next two years are prepared to enter the market. They say they are waiting for lower cost of living and lower interest rates.

“Our rental markets appear to be stuck in a holding cycle of severe undersupply.”

Higher rents and living costs have delayed the dream of buying a home

The dream of buying a property in the short-term has been dashed for 29% of renters who say they are not able to save anything, while just shy of one-third (32%) aren’t able to save the same amount anymore. 

A much smaller percentage (5%) of renters haven’t yet felt the impact of rising costs because they haven’t started saving for a home. Only 8% report their ability to save hasn’t been impacted and just over one-quarter (26%) aren’t impacted at all as they don’t have plans to buy property.

Mickenbecker adds, “First home buyers are going to have to make compromises on where they live and the style of housing when making their first entry into the market, but the opportunity is still there.”

“Higher rents have made saving difficult and singles in particular will find putting a deposit together and then covering the repayments a challenge. 

“The Bank of Mum and Dad can provide a helping hand so long as the family finances can cope, with 22 percent of Aussies saying parents have an obligation to help their children buy. This is down from 24 percent a year ago, but the intent is still there. 

“For parents with the desire to help their children but not the finances, there are other forms of support being suggested, with Aussies saying financial education was the best form of support followed by rent-free accommodation.”

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Notes to Editors

¹ Please refer to: www.canstar.com.au/biggest-original 

About Canstar
Canstar (Canstar.com.au) is a leading research agency and Australia’s biggest financial comparison site*, comparing more brands than any other. Founded in 1992, Canstar aims to simplify the world of finance by comparing over 820 brands across more than 30 finance categories including banking, insurance and superannuation. Our team of expert researchers analyse thousands of finance products to develop our Star Ratings and Awards, aimed at helping consumers find products offering outstanding value, not just the lowest price. We’ve also recently launched Customer Satisfaction Awards to add a consumer perspective to the comparison equation. In 2010, we expanded our services and launched Canstar Blue (Canstarblue.com.au) to provide customer satisfaction research and ratings for over 1,800 brands across more than 300 consumer products and service categories. Today this also includes price comparisons for energy, phone and internet providers. Canstar is not owned by a financial institution, holds Australian Financial Services and Credit licenses, and takes its compliance obligations very seriously. 

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