Thursday, October 13, 2011

Household Expenditure Survey 2009/10

Occupancy costs comprised 20% of household expenses in the US and UK in 2009, whilst the 2003/04 Household Expenditure Survey published by the Australian Bureau of Statistics reported that occupancy costs in Australia – mortgage, rent, payments – comprised 16.1% of total household expenses. What does the latest survey show?

The 2009/10 HES was released by the ABS on the 6th September 2011 and provides a critical insight to the expenditure practices of Australian households and their implications for retailing development and performance in Australia.

The amount Australian households spend on their housing or occupancy costs has risen markedly from 10.7% of all expenditure in 1988/89 to 13.9% in 1998/99 and 18.0% at the time of the 2009/10 survey, reflecting the need for households to direct an increasing share of their incomes to cover the simple need of providing shelter. Housing comprised the largest proportion of a broad expenditure group in 2009/10, overtaking food and non-alcoholic beverages, which comprised the highest proportion in 2003/04. Food and non-alcoholic beverages expenditure has been steadily decreasing since the 1988/89 survey (19.1%), comprising 16.5% in 2009/10.

The clear growth sectors in terms of share of expenditure have been in recreational goods and services, medical care and health expenses, and miscellaneous goods and services. Households are more willing to direct their incomes towards goods and services that are in effect improving their overall lifestyle
rather than simply filling a need.

The largest decline exhibited in a broad expenditure group was in the household furnishings and equipment group, decreasing by 23.4% since 2003/04 and a significant 57.4% since the 1988/89 survey, heralding challenges for the bulky goods sector and the future positioning of development and discount development stalls.

As Maslow's hierarchy of needs suggests, individuals first aim to meet basic psychological needs of hunger and thirst and shelter, followed by safety, family, property and resources once this need has been met. At the top of the hierarchy is self actualisation, esteem and social (love and belonging). The 2009/10 expenditure survey demonstrates that Australian households are slowly but steadily increasing the amount they spend to meet these higher needs.

The most basic human needs for shelter, food and water comprise the "lion's share" of total household expenditure (34.5% in 2009/10), but has decreased since 2003/04, whilst expenditure on more esoteric items e.g. health and fitness membership, theatre and cinema admissions and holidays has increased markedly over time.

However, the proportion spent on a number of broad expenditure groups has remained constant since the 2003/04 survey, including domestic fuel and power, alcoholic beverages, transport and personal care. Obviously, the level and pattern of expenditure differed between households, reflecting characteristics such as income, wealth, household composition, household size and location.

So where to for the 2015/16 survey and beyond?

Basic household needs will continue to comprise the "lion's share" of total expenditure, and it is unlikely that we will see a complete inversion of the needs pyramid however we do anticipate an evolvement into more of a "hour glass" shape, with continued emphasis on self actualization and "I have made it" expenditure, particularly as confidence in the economic outlook starts to take shape. Key expenditure themes we believe will continue to dominate include:

  1. FEED ME - continued decline in expenditure on food and non-alcoholic beverages but continue prominence
  2. HOUSE ME - continued growth in household costs as occupancy and utility costs continue to grow
  3. DO IT BY ME – a decline in household establishment expenditure
  4. DO IT FOR ME – increasing expenditure on "do it for me" goods and services

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