According to recent data from the Commonwealth Bank of Australia (CBA), mortgage holders spend more on discretionary items than renters despite having more significant financial obligations.
On 15 August, CBA released its latest Commbank Household Spending Insights (HSI) Index, highlighting a significant spending gap between renters, mortgage holders, and homeowners. The HSI Index, which tracks household spending across 12 categories, remained steady at 148.2 in July, following a 0.8% increase in June.
The data, drawn from approximately 7 million CBA customers, representing about 30% of all Australian consumer transactions, reveals that cost-of-living pressures affect Australians differently. Specifically, renters have been tightening their spending more than those with mortgages.
Over the past year, discretionary spending by renters increased by just 0.3%, mortgage holders’ spending rose by 3.3%, and homeowners’ spending rose by 4%. Renters have reduced spending in several categories, including education, household services, hospitality, and recreation while increasing spending on essentials like insurance and utilities.
CBA’s chief economist, Stephen Halmarick, noted that renters have been significantly cutting back on discretionary spending since late 2022, with rising rent costs contributing to this trend. He emphasised that renters’ spending has remained relatively flat this year compared to mortgage holders’ and homeowners’ higher spending levels.
Halmarick also commented on the recent federal government income tax cuts, noting that their impact on household spending behaviour has yet to be fully realised. He expects that as the effects of these tax cuts become more apparent in the coming months, they may influence spending patterns.
Looking ahead, Halmarick anticipates that softer economic data, a further slowdown in inflation, and easing monetary policies from overseas central banks could prompt the Reserve Bank of Australia (RBA) to cut interest rates shortly.
CBA also released its full-year financial results for June 2024, showing a $12 billion increase in the bank’s mortgage book and a 2% rise in total balances from June 2023 to June 2024. The data also revealed that 66% of CBA home loans now originate through the direct channel, up from 61% in the previous year.