Taylor Swift, Barbie and Matildas not enough to shake off financial woes

Adrian Rollins
August 1 2023 - 5:30am
Watch: The cost of living in Australia is rising – quickly – and it's expected to keep rising throughout 2023.

Despite recent attention-grabbing splurges on blockbuster events like Taylor Swift concerts, the FIFA Women's World Cup and Barbie and Oppenheimer, the evidence is mounting that consumers are pulling in their spending.

As the Reserve Bank of Australia board considers whether or not to keep interest rates on hold for a second consecutive month, there are clear signs that many households are cutting back on purchases and dipping into savings to get by.

Commonwealth Bank of Australia chief economist Stephen Halmarick said while people were lashing out on tickets, travel and accommodation to attend major events, they were simultaneously reining in spending in many other areas.

Devoted Taylor Swift fans are splurging on concert tickets but consumers overall are pulling back on spending. Picture by Sitthixay Ditthavong
Devoted Taylor Swift fans are splurging on concert tickets but consumers overall are pulling back on spending. Picture by Sitthixay Ditthavong

While paying for housing and food remained people's top priority, Mr Halmarick said the evidence suggested they were willing to splash out on a major event while cutting back on other spending.

"Rather than paying for regular enjoyable services, people are spending their money on the big events," he said, and linked the behaviour to the lingering effects of the pandemic and its associated restrictions.

"Massive events like Taylor Swift, there really wasn't much of of that for two years," he said. "It's similar to people holidaying in Europe. There's a bit of catch-up going on."

But although spending on concerts, films and other events claims prominence, "when you look across the board spending on discretionary items is definitely slowing," the CBA economist said.

Mr Halmarick said credit card data collected by the bank showed "a pretty clear loss of momentum in consumer spending for the last six months".

This was borne out by ABS data showing spending in department stores, on clothing and footwear, eating out and on household goods and furniture all fell in June.

Adding to the picture of families under financial stress, the household savings ratio plunged to a 15-year low of 3.7 per cent in June, a dramatic decline from a recent high of 13.5 per cent reached at the end of 2021.

The decline in savings has been particularly acute among younger households, according to Mr Halmarick.

The CBA economist said the large bulk of savings were held by those aged 55 years or more while among those aged between 18 and 45 years "there is very little extra savings at all".


The RBA board is expected to look closely at household spending when it considers whether or not to resume hiking rates on Tuesday.

Retail sales slumped by larger-than-expected 0.8 per cent in June following a similar sized jump the previous month which was driven in part by heavy discounting and promotions.

Credit growth has also buckled as high interest rates deter borrowers, dipping to a little more than 4 per cent in June after reaching more than 9 per cent late last year.

The central bank will also take into account other developments, including a slowdown in the annual inflation rate to 6 per cent in the June quarter, ongoing tightness in the labour market (with the unemployment rate holding at 3.5 per cent in June) and a marginal improvement in expectations for the global economy - including receding recession fears in the United States but weak Chinese growth.

Markets think there is a less than one-in-10 chance of an August 1 rate hike but the nine-member Australian National University RBA Shadow Board is split on whether or not the central bank raise rates.

The shadow board reckons there is a 47 per cent chance that a rate pause is the best choice, while it puts the likelihood that a hike is the right decision at 46 per cent.

Centre for Independent Studies chief economist Peter Tulip expects more rate hikes will be needed, dismissing arguments that the current tight labour and housing markets can be sustained without fueling inflation as "wishful thinking".

"This opposition to policy tightening rests on a refusal to make difficult decisions or to accept unpleasant trade-offs," Mr Tulip said.

Mr Halmarick also thinks there will be a rate rise on Tuesday.

But Sydney University economist James Morley said inflation had clearly peaked and "the RBA can let the effects of past hikes in rates play out to bring inflation down further".

Adrian Rollins

Adrian Rollins


Adrian Rollins is economics correspondent for the Canberra Times