Real household discretionary income

IBISWorld forecasts real household discretionary income to rise by 2.4% in 2024-25 to $542.5 billion. This expected growth follows a sharp downturn in household discretionary income over the three years to 2024-25 in response to inflationary pressures and rising interest rates. Interest rate hikes in recent years have heightened the cost of interest repayments, pushing down disposable incomes. This pressure has been exacerbated by inflation, which has raised the cost of living, eroding households' incomes after essential spending and limiting discretionary spending. A rise in the national unemployment rate over the year is expected to place added downward pressure on discretionary incomes. Despite this, sliding discretionary incomes have been partially offset by a hike in social assistance payments and relatively tight labour conditions, supporting wages during 2024-25.

Despite the pandemic-related disruptions, real household discretionary income rose strongly over the two years through 2020-21. Several government support packages supported discretionary income growth, including JobKeeper and JobSeeker. Additional measures, like early superannuation access and tax concessions, accelerated the rise in discretionary income over those two years. Lockdowns and remote work arrangements throughout the pandemic also reduced consumer transport and motor vehicle expenses, boosting discretionary income.

Real household discretionary income has fallen over the past five years. Post-pandemic, household wages have risen at a modest rate due to stagnant productivity growth, excess workforce capacity and workforce casualisation. The cost of many essential household items, like utilities, healthcare and insurance, have also risen over the period. For instance, health insurance premiums have spiked, while healthcare services expenditure has been growing due to Australia's ageing population. Falling discretionary income can also be attributed to natural falls following artificial highs of the pandemic. IBISWorld forecasts real household discretionary income to fall at a compound annual rate of 0.7% over the five years through 2024-25.