Cost of living pressures continue to bite, and it’s those aged 25-29 who are tightening their belts the most. In fact, younger Aussies are the only age group cutting back on both essential and discretionary expenses. This week, CommBank iQ – our joint venture with Commonwealth Bank – released its latest Cost of Living Insights Report. The report takes de-identified payments data to reveal how Australians are adjusting spending and to help businesses keep up with customer preferences. While younger Australians and those in metro areas continue to be hardest hit, there is a glimmer of hope with the data showing downward momentum losing some steam. The news is even better for over-60s, who are spending ahead of inflation, and Aussies in regional areas – though the spending gap between regional and metro areas is narrowing. To learn more and download the full report, visit: https://bit.ly/3K9CEVg
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Perspective is everything. As an analyst I instinctively push back on this notion, but much to my chagrin science is against me. Apparently a year after a major win (the lottery) or loss (including an permanent injury) people report their overall day to day well being as pretty much the same as before the event. Which brings us to the headline on a great slide from the Credit Clear Limited (ASX:CCR)'s 3rd quarter results presentation. "Household real incomes are not expected to recover to their pre-pandemic levels until 2027" The accompanying slide paints a pretty bleak picture, with Australian gross household disposable income per capita declining back at 2014-2015 levels. It certainly explains the pain many households are feeling and the headlines we're seeing about cost of living pressures, but if you think back to 2014-2015, how would most households feel about their disposable income? Would they be stressed, feeling their budgets were stretched and nervous about the outlook? I don't remember seeing headlines to that effect. Any yes, details matter. There is a generational bifurcation of with home owning retirees benefiting from higher interest rates, and non-outright home owning workers bearing the brunt of higher interest rates but I don't remember times being too tough in 2014-2015. Perspective is everything.
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Navigating Household Finances During #Inflation Inflation, the persistent increase in the general price level of goods and services, significantly affects households and their financial well-being. This article explores the diverse dimensions of how households perceive and respond to inflation, exploring the #challenges it presents and the #strategies employed to navigate this economic phenomenon. ✅Understanding Inflation In essence, inflation diminishes the purchasing power of #money, impacting the real value of #income and savings as prices escalate. Households intuitively grasp these changes as they observe fluctuations in living costs through everyday expenses like groceries, housing and transportation. 💵Impact On #Budgets And Spending Inflation directly impacts household budgets, elevating expenses for essential goods and services. This strain on financial stability, particularly for those with fixed incomes, prompts adjustments in spending habits, compelling households to prioritise necessities over discretionary items. 💰Savings And Investments Inflation's influence extends to savings and investments, diminishing the real return on fixed-rate savings accounts or #investments. To shield their wealth, households may diversify portfolios or explore assets historically resilient to inflation. 💼Employment And Wage Considerations Perceptions of inflation are linked with job security and wage #growth. In an inflationary environment, stagnant wages may decrease in real value. Households respond by negotiating higher wages, seeking additional income streams or investing in education to enhance employability. ⚖️#Debt Dynamics The relationship between inflation and debt is intricate. While inflation erodes the real value of debt, variable interest rate loans may lead to increased interest payments. Households must manage debt judiciously to avoid financial strain. ☀️Consumer Confidence And #Economic Outlook Households' inflation perceptions influence consumer confidence, shaping spending patterns and economic activity. Adjustments to financial strategies are made based on confidence in economic stability. 📃#Government Policies And Interventions Households closely monitor government responses to inflation, influencing expectations and decisions regarding savings, spending and investment. 🛣️Long-Term Planning Inflation prompts households to engage in long-term #financial planning, emphasising education, homeownership and retirement savings to secure their financial future. 🟩Conclusion The view of inflation from a household standpoint is ever-changing and influenced by economic factors, personal situations and external pressures. Inflation requires thoughtful financial strategies as a continual presence in the economic landscape. From financial planning and investment decisions to employment selections and future preparations, households play a crucial part in strengthening their economic resilience amid inflation.
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Released today | The latest Melbourne Institute Monthly Inflation Gauge and Cost of Living report recorded higher consumer prices in November, although annual inflation fell significantly. Annual changes in the cost of living also fell across a range of household groups (including employees, pensioners and beneficiaries and self-funded retirees). Learn more → go.unimelb.edu.au/tp8e #costofliving #ausecon #inflationgauge
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📢 Excess savings drive sustained #consumption in the #US. The recent revision of the estimate of excess #savings is widely discussed for the potential consequences it could have on the US #economy. However, why don't European economies follow the same trajectory? 🏦 Government Expenditures: Major European countries have opted for measures favoring #employment and direct aid to #businesses. For example, the short-time work schemes, representing over a quarter of total measures taken in 2020, help maintain employee #income. In contrast, the United States stands out for prioritizing direct support to the incomes of businesses and #households. Regarding households, a substantial unemployment benefit and three rounds of direct checks were implemented between 2020 and 2021, thereby increasing household incomes. 💵 Excess Savings: In Europe, the measures adopted do not significantly enrich households but keep them at a pre-pandemic level. Thus, excess savings are held by individuals at the top of the income distribution who have a greater capacity to save, i.e., the top 20% possesses half of the excess savings. Given their available income level, these individuals do not need to spend this savings and invest it in illiquid #assets. In the U.S., the adopted measures directly enrich all households. Excess savings are distributed across the entire income distribution, with the lower end of the income distribution saving more relative to their annual income than others. It is these individuals on the left side of the distribution who are inclined to use their savings to maintain their purchasing power in the face of #inflation. 📈 BEA Revision: The impact of the upward estimate of excess savings on U.S. consumption is ambiguous. The latest estimates show a decline in the savings #rate, likely driven by the financial vulnerability of low-wage earners, a decrease in consumer sentiment and expectation reflecting households' uncertainty about economic conditions, and an increase in credit card balances also driven by lower-wage earners. Then, it is possible that this excess savings has become similar to that of European countries: low-income or modest households have already used their savings, and the remaining savings belong to the wealthier ones, i.e., long-term savings that will have a moderate impact on consumption. The year-end holidays will be a good test!" Here are some interesting readings: graph from Antoine Math --> https://lnkd.in/ecFyzGgt from ECB Blog --> https://lnkd.in/eV_BQZWv from Boston FED --> https://lnkd.in/eiqhXK2F This post reflects my personal opinion and I am responsible for any errors. #macro #economics #job #finance #recession #us #eu
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📊 Financial Impact of COVID-19: Who's Thriving and Who's Struggling Four Years Later 📊 Four years after the outbreak of COVID-19, the financial landscape has shifted in surprising ways. This insightful article from The Conversation delves into who has come out better off and who has been left worse off in the aftermath of the pandemic. The findings reveal unexpected trends and disparities that are essential for understanding the long-term economic effects of the crisis. I highly recommend reading this article for a comprehensive analysis of the financial picture post-COVID: The Conversation Article. Article Summary: Four years after COVID-19 first disrupted our lives, the financial outcomes for different groups have diverged significantly. Key findings include: ♦ Income Levels: While some high-income earners have seen substantial financial gains, many low-income earners continue to struggle. ♦ Savings and Debt: Overall savings have increased, particularly among the wealthier segments, whereas debt levels have surged for others. ♦ Job Market: Employment has rebounded in some sectors, but others, especially those requiring in-person work, are still facing high unemployment rates. ♦ Government Support: The end of government support measures has left some individuals and businesses in precarious financial positions. ♦ Housing Market: Homeowners have benefited from rising property values, while renters face increased financial pressure. ♦ Mental Health: Financial stress has contributed to deteriorating mental health for those hardest hit by the economic downturn. These insights are crucial for understanding the uneven economic recovery and for developing policies that address the needs of those still struggling. #Accounting #BusinessFinance #smallbusiness #businessownership #ILOVEWHATIDO
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New data sheds light on the increasing #financialpressures squeezing Australia's #middleclass out, calling attention to the urgent need for effective #financia strategies and support to alleviate #economicchallenges writes Michael Jeffriess, CEO of LYD. Firstly, what’s considered middle class? The Australian Institute defines it as a full-time worker with an annual salary of roughly $83,000 in 2024. Middle-class families are finding it increasingly difficult to balance their #budgets. Unsurprisingly, the National Debt Helpline has reported a surge in calls as Aussies try to manage rising interest rates. The Consumer Price Index (CPI) indicates a 3.6% increase in living costs over the past year, driven by higher prices for housing, food, and healthcare. The latest published wage growth rate averaged 3.75% this past year. However, this number includes top-tier earnings, making it difficult to discern a correct average... More at #Proactive #ProactiveInvestors #costoflivingcrisis #costofliving #inflation http://ow.ly/tZsz105ER2T
Middle class squeeze as financial pressures mount
proactiveinvestors.com.au
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Interesting data out of Australia showing changes in spending patters between different age groups in response to inflation. Interest rate hikes affect all of us, but not equally... To me this reinforces the importance of taking control of your finances so you are not as severally impacted by external factors beyond your control! https://lnkd.in/geEUrpe2
Younger people now even cutting back on essentials, as older Australians spend up on cruises and restaurants
abc.net.au
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Households are dipping into saving to stay afloat. From 2020 to late 2022, households built up $22.2bn of saving. Household income growth and household spending was strong. Since late 2022, the household sector has been in active dis-saving mode, although this is modest for now. Household spending growth has slowed to a crawl. The government has used its balance sheet to support households and businesses during COVID, There is less scope to do this now. Corporates are struggling, with acute margin pressures. After peaking in late 2022, incomes for the non-financial corporate sector are now about 7% lower. Cumulative losses for the non-financial corporate sector are $9bn since late 2022 and climbing. We are wary that a challenging backdrop for corporate profitability, will have implications for the employment, wage and investment outlook and hence core inflation (all down). Hence our OCR call change. Please see our household note for more details: https://lnkd.in/g76YCg-f
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Private Banker at Commonwealth Private Bank | Residential & Commercial Finance - 0478 881 429 - Michael.Mahle@cba.com.au
💸 Inflation in Australia didn't just creep up over the first quarter of this year—it surged, catching many by surprise. The recent figures, showing a quarterly rise to 1% from the previous 0.6%, have left economists and everyday Aussies alike grappling with the reality that high interest rates might be sticking around for a while. This hike, well above the anticipated 0.8%, points to an economy that's feeling the pressure in pockets that hit close to home, like education and housing. 🎓Year-on-year, the inflation rate has actually dipped slightly to 3.6% from a higher 4.1%, which sounds like good news, but the devil's in the detail. Education fees, for instance, have rocketed up 5.9% with the new school year—this is the steepest increase we've seen since 2012. If you're a parent, that's a direct hit to your back pocket as every level of schooling from preschool to tertiary education becomes pricier. 🏥 Healthcare hasn't been spared either. Medical and hospital services typically see a bump in costs at the start of the year, and 2023 was no exception with prices climbing 2.8%. This hike is partly due to the resetting of Medicare and Pharmaceutical Benefit Scheme Safety Nets, making fewer Aussies eligible for subsidised healthcare and medications early in the year. 🏡 Housing costs continue their upward march as well. Rents have jumped 2.1% this quarter, maintaining their fastest climb in 15 years, driven by a tight market across major cities. For those looking to escape the rental rat race by building, the cost of new dwellings rose by 1.1%, pushed up by the climbing costs of labour and materials. 🧐 So, what's the takeaway here? These figures translate directly to more strain on your wallet, especially if you're juggling mortgages, rent, or school fees. And with the economy showing its sensitivity to interest rates, it's more crucial than ever to budget smart and prepare for the possibility that the cost of living could keep climbing. This is the real-world impact of those inflation figures: they're a clear sign that we need to brace ourselves for an economy that demands resilience and careful financial planning.
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‘Ageing population to keep interest rates high for years to come’ Predictions of higher interest rates and inflation, caused by a larger portion of population becoming retirees and therefore leading to labour shortages as well as higher wages, should be cause for concern. While high interest rates yield better returns on savings, they aren’t always in line with the increase in costs associated with current rates of inflation. Ensuring your money is invested wisely and providing an actual year on year return is vital for building long term wealth and ensuring that you can actually retire when you want to and not when you can afford to. While there are plenty of suitable DIY providers available you may find more benefit in a fully managed service. At Acorn to Oaks Financial Services Limited our advisors are aware of macroeconomic factors which can affect funds and undertake reviews to ensure your money is invested in the appropriate funds to While there are no guaranteed returns, harnessing the expertise of our team could help ensure that your pension pot & investments are suitable for your retirement plans. If you are interested in learning more about what we have to offer, please message myself, Rahul Gupta or give us a call on 01902 409414. https://lnkd.in/eASB4cSU [Article written in the Telegraph by Eir Nolsøe]
Ageing population to keep interest rates high for years to come
telegraph.co.uk
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PMO Director/Lead/Manager/Governance Manager.
3moYou have to ask how much of this is because the 25-29 y o is staying at home/ returning to home with mum & dad to live ...