‘Cut-back fatigue’: Australians unwilling to rein in spending despite renewed cost-of-living pressures

Australian consumers are feeling increasingly stressed about their finances amid renewed cost-of-living-pressures, yet new bank data suggests they are unwilling to tighten belts further.

The bank’s consumer stress index hit 59 in the December quarter, with a reading above 100 meaning people were extremely concerned. The result was up from the previous quarter’s 57.7 and also above NAB’s long-term average.

NAB chief economist Sally Auld said for most consumers, interest rate cuts from the Reserve Bank of Australia were now a distant memory.

Amplified concerns over job security — now at its highest point since early 2020 — was also a factor in rising consumer stress.

RBA deputy governor Andrew Hauser this week strongly hinted the next move in the cash rate was more likely a hike than a cut, despite inflation moderating to 3.4 per cent in the year to November.

The RBA next meets on February 2-3.

But NAB said while consumers remained cautious and conscious of their spending, the willingness to tighten belts further was wearing thin after an extended period of financial restraint.

The share of consumers planning to cut overall spending is now at its lowest point since early 2023.

“Many Australians have already spent months or years trimming non-essential expenses such as dining out, treats, entertainment and holidays in response to ongoing cost-of-living pressures,” Ms Auld said, adding a “cut-back fatigue” was emerging even though many households remain under financial strain.

She said this fatigue could have broader implications for the economy and for businesses.

“For retailers and service providers, it signals an opportunity to appeal to consumers who are seeking value but are also increasingly willing to spend on offerings that feel worthwhile,” Ms Auld said.

“For policymakers, recognising cut-back fatigue is important as it indicates a segment of the population may be reaching the limits of their financial resilience, raising concerns for overall wellbeing and economic participation.”

Victoria reported the biggest increase in levels of stress. SA and WA recorded slight declines.

Stress remains most acute among younger and lower income groups, being more likely to borrow, sell assets or work more, while older and higher-income consumers are “more insulated”.

Women also reported higher stress than men across all age groups, with the biggest difference recorded in in the 50-64 age bracket.

The Australian Bureau of Statistics is set to release household spending data for November next week, which AMP expects will show a 0.6 per cent rise following a 1.3 per cent lift in October.