Australasian Households

By Roger Parker

Last week the Australian Bureau of Statistics released its Household Expenditure Survey, which shows how much each household, on average, spends on different types of things. It’s been a long time between surveys. The previous survey was released for the 2003 / 2004 year. This current release is for the 2009 / 2010 year, a six year gap.

New Zealand has an annual survey of this type. So with the Australian one now out, this allows us to see how Australasian Households (both countries) are shaping up. So what do Australasian Households now look like?

Please note all the figures in the article below have been converted to Australian dollars.

Let’s start with total average household spending per week. In Australia, the average household is spending $1,236 per week. This is up $353 per week from six years ago. It’s a substantial rise in spending power. The Australian consumer has $18,356 per year more to spend now.

If we compare across the Tasman Sea to New Zealand, things are not so rosy. The average New Zealand household has $808 per week to spend (from the 2009/2010 New Zealand survey), which is $22,256 less per year to spend than the average household in Australia. New Zealanders are now not just significantly less well off than Australians, but significantly less well off than Australians were six years ago.

Australasian households are characterized by a growing gap in spending power. To anybody living in either country, most of you know this already. Over the past decade there’s been a growing tide of New Zealanders heading to Australia for a better life. Tens of thousands head to Australia from New Zealand each year and the numbers have reached new records recently after the Christchurch earthquake.

This changes who people are in the different countries. In Australia, 93% of the population was originally born there (2006 figures). In New Zealand, 77% of the population was originally born there (2006 figures). As large numbers of people leave New Zealand, new ones have been brought in from other countries. This is changing the demographic and cultural shape of the population much faster than in Australia.

With the income disparities, how are households spending their money? How does it shape behaviour when one group has had strongly rising spending power, and another is diminishing in comparison?

The biggest four dollar changes in how Australian households have spent their extra money is in housing, transport, food and recreation. The average household in Australia now spends an extra $4,576 a year on their housing, $2,808 a year more on transport, $2,652 year more on food, and $2,496 a year more on recreation.

Part of this is likely to be macro economic changes which have steered spending into certain areas. There’s been a housing bubble so housing costs have gone up, there’s been more user pays transport in Australia recently. However another part is likely to be that when households’ incomes lift, they like to live in better houses, travel more, eat better food and have more recreation.

The shape of spending behaviour in a time of rising spending power compared to neighbours is to try and make a better life for yourself and your family, with the priorities in Australia the house, transport, food and recreation.

Over in New Zealand, the same four are biggest dollar spending differences between the two countries. The largest gaps in spending are New Zealand households spend less on transport, recreation, food and housing. New Zealanders are less able to travel, enjoy as much recreation, eat as good a food, or live in as expensive a house.

New Zealanders also spend a greater proportion of their household budget on Housing and Food, and a lower proportion of their household budget on Recreation and Transport, than Australians.

With households in New Zealand having less to spend – the discretionary spend areas are lower – a lower proportion of their total spending is on transport and recreation. However the essential spend areas are higher – a higher proportion of their total spending is spent on Housing and Food.

The shape of spending behaviour in a time of falling spending power compared to neighbours is to try and survive. These households spend more of their available money on maintaining essentials like the house and food, and curtail items you and your family might enjoy like more transport and recreation.

When we look in the middle between essential and non-essential items, say at Medical Care and Health, which can be both, the differences are also interesting. Australians spend on average $3,432 per household each year on medical care and health. New Zealanders spend 244% less. The average spend is $998 per year per New Zealand household.

This is the single biggest major category difference between the two countries. Australians spend more on their medical care and health, New Zealanders much less. Likewise this has been another migration factor. Doctors and Health Professionals get paid so much more in Australia, many New Zealand health professionals leave, which hollows out the New Zealand’s skill base and cheaply builds Australia’s skill base because they don’t have to pay to train these people.

For average households in different countries, one set is able to get more medical and healthcare. For the other country’s people, they’ve less ability to get medical and health care, and are likely to be less healthy long-term as a result.

Here you have the essence of how the Australasian households have been shaping up over the last six years. New Zealand’s demography and cultural make-up is changing more quickly than Australia because a greater proportion of are people leaving. Those people, in the lucky country, with rising incomes, have the essential items less of a concern and spend more on things to improve their enjoyment of their life. While those in the country with diminishing relative purchasing power, are struggling to survive and maintain essential items and spend less on things to improve enjoyment of their life. At the same time, one group is likely to be unhealthier and the other healthier long term.

While it's a rather bleak comparison it’s useful to make nonetheless. The two countries are neighbours geographically, and traditionally neighbours culturally, but are drifting apart economically quite quickly. The same type of household spending patterns are likely to happen in a variety of contexts right now.

Have a think about what will happen with rising income disparities within regions, or income disparities amongst certain groups within countries; with sudden national income changes (either recessions or growth spurts), and with major changes in employment and unemployment patterns. All these types of economic shift are happening in different places around the world at the moment.

Roger Parker is a director of New River Ltd.