New data released by the Australian Bureau of Statistics (ABS) shows Australians are cutting back their spending on alcohol and tobacco as cost of living pressures hit household budgets.

Household spending rose 11.8 per cent in February compared to the same time last year, according to figures released today by the Australian Bureau of Statistics (ABS). 

Robert Ewing, ABS head of business indicators, said that this represented slower growth in household spending, as through-the-year spending fell to its lowest rate since March 2022.

“Spending on discretionary goods and services rose 5.8%, the smallest through-the-year percentage growth since January last year, as households continued to adjust to cost of living pressures.

“Non-discretionary spending recorded a larger rise of 17.5%, as households spent more on Transport and Food,” Mr Ewing said.

Through the year household spending increased in all spending categories except alcoholic beverages and tobacco (-12%).

The largest increases were in:

• hotels, cafes, and restaurants (+25.9%)
• transport (+25.7%)
• food (+12.8%)

Bank data shows tobacco and alcohol spending fell -8.9% in NSW, -13.7% in Victoria, -14% in Queensland, -16.9% in South Australia, -14.1% in Western Australia, -9.8% in Tasmania, -2.7% in the Northern Territory and -4.5% in the ACT.

Cost-of-living crisis bites budgets

A recent Finder study found 71% of Australians are cutting back their spending on alcohol, meat and seafood amid the rising cost-of-living crisis.

Close to half of Aussies – 47% – have reduced the amount of takeaway and fast food they buy, 35% have resorted to buying less meat and seafood, and 32% have decided to cut back on alcohol spending.

Head of Consumer Research Graham Cooke said: “A demographic that seems to be heavily affected is younger generations. When you ask generation Y or generation Z, 60–70% are feeling stressed with the cost of living.”

It’s a trend that is being seen across the globe. Data analyst IRI has reported a €2.4 billion decline in off-trade alcohol sales throughout Europe during 2022, meaning sales are now lower than before the pandemic.

Meanwhile, the volume of beer sold per person in Canada last year reached an all-time low, while the wine sales based on volume also experienced its largest decline since tracking began in 1949, according to Statistics Canada.

IWSR: Consumers opt to spend less on beverage alcohol

The latest findings from IWSR confirm that stated alcohol spend is falling in many markets, including Australia.

“To allay the impact of the cost-of-living crisis, beverage alcohol consumers are becoming more selective in how and when they spend on alcohol,” said Richard Halstead, COO Consumer Insights, IWSR Drinks Market Analysis.

“After the pandemic, at-home drinking is still preferred, but there is a strong motivation to go out, just with less frequency and more mindfulness in alcohol consumption and spending.”

Key findings from IWSR’s consumer surveys conducted in February 2023 across the 17 key markets of Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Netherlands, Poland, South Africa, Spain, Taiwan, the UK, and the US, show alcohol’s share of wallet is declining due to cost of living pressures.

Premium consumption behaviour is continuing in many markets, but is growing at a more moderate rate than previously. Most alcohol categories – especially spirits – show an increase in the acceptable price ceiling, and many categories show a broadening of acceptable price range (both up and down). Price ceilings have risen for most whiskies, as well as categories including gin, vodka, pre-mixed alcohol drinks, and still and sparkling wine. For select categories in some markets, the price floor is lower than the previous wave (based on consumer surveys conducted in October 2022), such as for beer, Champagne, still wine, vodka, and Irish whiskey.

Whiskies remain more positive than other categories, however IWSR said consumer momentum for it is slowing in Australia “due to adverse economic and tax conditions”.

There is consistently positive sentiment towards the idea of moderation, especially as a money-saving strategy. IWSR said this supports the resilience of the premiumisation trend, with many consumers choosing to drink better quality less often, rather than having to down-trade.

“Relying on promotions is the top money-saving strategy, enabling consumers to still stick with their preferred brand or drink type,” IWSR said.

The things Aussies aren’t prepared to give up

However, new research from comparison website Compare the Market found that alcohol, takeaway meals, coffee and health and beauty appointments are among the top things Australians aren’t prepared to go without as cost-of-living pressures continue to put a strain on households across the nation.

More than a quarter of Australians said they weren’t willing to cut their social outings to ease costs – a figure that isn’t surprising to Compare the Market’s Natasha Innes.

“Households across Australia experienced some of the strictest COVID-19 lockdowns around the world and many people don’t want to forgo spending time out and about with their family and friends as a way to ease financial pressures,” Innes said. “Thankfully, there are many ways to be social without breaking the bank, giving people the best of both worlds.”

The research shows that Baby Boomers value social outings more than any other generation at 33.2% (above the average of 26.6%). Conversely, Gen Z was least likely to say they’d give up socialising, at just 22.2%.

Meanwhile, takeaway meals and coffees remain a high priority for Aussies, with 17.3% unwilling to give up fast food or ordering in their favourite caffeinated beverage. One in five Gen Zers wouldn’t give up their fast food, compared to just 11% of Boomers.

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