Energy prices are rising but they're far from our biggest expense
For every dollar the average Australian spends on their energy bill, they spend almost double - $1.82 to be exact - on restaurant meals, fast food and takeaways.
More strikingly, Australians spend more on tobacco products than they spend on electricity and gas, even though only 10 per cent of the adult population smoke and close to 100 per cent of the population use electricity and gas.
Consumption of electricity and gas makes up 3.49 per cent of household spending; restaurant meals, fast food and takeaway accounts for 6.35 per cent of spending, while tobacco products take 3.56 per cent of the average household’s budget.
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These are some of the striking facts about where we Australians spend our money, and puts some context around the current cost-of-living issues, including the effects of the forecast 56 per cent lift in electricity prices within the next two years.
These spending weights are from data used to estimate the Consumer Price Index (CPI). The CPI is compiled by the Australian Bureau of Statistics (ABS), which calculates how much we as consumers spend on each item that goes to make up the overall index.
The weight of each item in the CPI basket is based on data from household financial consumption expenditure and is regularly updated to reflect changes in spending patterns. For example, we are collectively spending more on computers and electronic items and less on beer today than we did two decades ago and this shows up in changes in the weights in the CPI.
Energy prices climbing
There is a lot of concern about the effect on consumers of the expected 56 per cent rise in energy prices over the next two years.
And fair enough. It is also a massive issue for the business sector.
No one wants to be slugged with a massive increase in their quarterly power bill but, given where we consumers actually spend our money, the effect could be less severe than the media coverage of the issue suggests.
Of course, not every household is in the fortunate position where they may meet the sharp lift in energy costs by trimming their spending on takeaway food or tobacco. This is why there is a political imperative to ensure low- and middle-income earners, in particular, do not suffer if these hefty energy price increases come to pass.
Perhaps one reason for the high profile given to power bills is because our spending on electricity shows up in a hefty bill every three months. By comparison, our spending on restaurants and takeaways are smaller, but steady, streams of spending every day or week at the local café, Chinese restaurant or takeaway.
Price rises in these areas are largely absorbed into our week-to-week spending; electricity bills are large and hit hard.
What else do we spend our money on?
The CPI has a range of fascinating data on the spending patterns of Australians. Recall, these are the average for all Australian households. If you don’t smoke, eat meat or rent a house, your spending on these items will be zero, of course, but lots of Australians do. That is the point of the CPI and the weights the ABS use.
Some other standout spending items are outlined below. The figures are the percentage of total household spending on each item.
This is not every item in the CPI basket, but it shows some of the higher-profile areas of spending.
We collectively spend almost 50 per cent more on snacks and confectionery than we do on dentists. We spend more on pets and vets than on pharmaceuticals. More on hairdressing and personal grooming than fruit.
This is our collective choice.
Spending on electricity and gas is a relatively moderate part of the average household budget, but that won't stop it being a massive issue for the Government to fix in the weeks and months ahead.
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