By Molly Nicholas

Despite a cutback on discretionary spending, Australian consumers are still finding money for entertainment experiences.

As Australian face sharp cost of living increases and rising interest rates, an increase in expenditure on essentials means that consumers are cutting back discretionary spend. Despite this, Australian consumers are still finding room in their budgets for experiential spending and prioritising entertainment.

According to the latest CommBank iQ Cost of Living Insights Report, while overall discretionary spending was flat, entertainment and travel spending recorded above-inflation growth, at 8.6 per cent and 8.2 per cent respectively.

The report found that 25-29 year olds had been hardest hit with a 5.1 per cent decline in their total spending, and despite a decrease in both essential and discretionary spending, this age group still saw a growth of 13 per cent on entertainment spending.

“Leaving room in the budget for experiences is a continuing trend. However, they are having to reduce spending in other areas,” says Wade Tubman, CommBank iQ head of innovation and analytics.

“We’re seeing consumers in their twenties cut back spending but still leave room to fund experiences. We’ve also seen younger people redirecting discretionary spending from things like clothes and homewares, to spend on cinemas and ticketed events such as concerts and sport.

“Given the most recent rate rise, it will be interesting to continue to monitor these trends, as we expect to see a dampening of the post-Covid experience spending preference.”

While Australians feel ongoing pressure from rising living costs, the average tip size at hospitality venues has also taken a hit.

In data released by Lightspeed Commerce, the average tip paid by Australians in hospitality venues has hit its lowest point in more than four years, dipping to 8.10 per cent of the total bill, the first time that the figure has dropped below nine per cent since January 2021.

While the average tip size has decreased, the number of Australians tipping in hospitality venues has remained stable. In August 2023, 0.52 per cent of payments included a tip, compared with the peak of 0.63 per cent in January this year and having not dipped below 0.51 per cent since August 2022.

“While Australians are not able to tip as much in the overall bill, we are seeing a positive trend in recent years with more customers regularly adding tips to their bill than in previous years,” says Andrew Fraser, Lightspeed manager director APAC.

“Tipping culture has not always been as strong in Australia as other nations. This trend, however, shows growing support towards the hospitality industry.”

In the CommBank iQ report data also indicated a regional divide when it came to spending, with regional Australians growing their spending at double the pace of metropolitan consumers (2.9 per cent versus 1.2 per cent).

Attributing this divide to higher housing costs in metropolitan areas, Tubman explained that the geographical spending gap was most prominent in New South Wales and Victoria.

“We’ve seen lower or negative discretionary spending growth in metropolitan New South Wales and Victoria where many people are grappling with higher rents and mortgages.”

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