Over the past year, spending on services has climbed sharply, up 5.9 per cent, while goods rose 3.5 per cent. On paper, that might suggest confidence. In reality, much of that increase reflects higher prices rather than fuller shopping trolleys. Annual inflation sat at 3.8 per cent in January, meaning a significant share of what we spend is just the cost of living rising.
Many of us are noticing essentials are swallowing a bigger share of our income. Essential spending rose 0.8 per cent in January, driven by health services and motor vehicle maintenance. Trips to the mechanic, medical appointments, and insurance premiums are becoming harder to absorb.
Discretionary spending barely moved, up just 0.1 per cent, with small increases in air travel, personal items and recreational services. That suggests most households are thinking carefully before splurging.
Services spending rose 1 per cent for the month, helped along by higher costs for digital streaming and travel. At the same time, spending on goods fell 0.3 per cent, led by fewer car purchases and less spending on recreational items. Many of us are postponing big-ticket items and repairing rather than replacing.
The pattern also reflects what happened late last year. Heavy discounting around Black Friday and the pre-Christmas period encouraged many households to bring forward purchases. Afterwards, spending dipped in December before recovering slightly in January. But this latest rise feels softer than it appears because higher prices are doing most of the work, not stronger demand.
Despite the squeeze, Australians are also trying to protect themselves. The household savings rate has risen to 6.9 per cent, the highest since September 2022 and above the pre-pandemic average. Many of us are building a buffer in case conditions worsen, especially with global tensions threatening to push up oil and petrol prices further.
From our perspective, the numbers confirm what we already know. We are not living larger; we are simply paying more to stand still.
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