Australian families are spending less on travel, entertainment, fashion and household goods like furniture as the effects of more than a year of rising interest rates squeeze millions of budgets.

An array of consumer spending figures published on Tuesday provided fresh insights into how shoppers have cut spending in early 2023, with official data published by the ABS and intentions figures from Commonwealth Bank combining to reveal a bleak picture.

The ABS identified a sizeable 0.6 per cent pullback on discretionary spending in annual terms during May, with fewer families spending on furniture, household equipment, clothing and footwear.

Australia’s biggest bank, meanwhile, is tracking lower spending intentions on entertainment, travel, health and fitness, as bank accounts come under pressure from the cost of living.

Elsewhere, survey data published by Compare the Market on Tuesday found almost three-quarters of households are making the switch to homebrand products to save extra money.

Budgets squeezed

It all paints a gloomy picture for consumer spending heading into the second half of 2023, with experts expecting the economy to slow markedly.

Interest rates have risen more than four percentage points since May 2022, adding more than a thousand dollars to monthly repayments on a $500,000, 25-year home loan.

And making matters worse, rents are soaring at the highest rates in years alongside energy bills.

Unsurprisingly, discretionary purchases have been the first to fall off a cliff as finances come under pressure.

ABS data on Tuesday showed falls in clothing and footwear (down 3.4 per cent annually); furnishings and household equipment (-4.8 per cent); and recreation (-3.2 per cent).

Spending is slowing across every state and territory, with ABS head of business indicators Robert Ewing saying that growth is the lowest since July 2021, in the midst of COVID-19.

“This comes as households respond to cost-of-living pressures,” he said on Tuesday.

Also on Tuesday, the Commonwealth Bank’s monthly household spending intentions index fell 1.7 per cent in June, led by declines in home buying, health and fitness, entertainment and travel.

Travel fell 2.5 per cent, compounding a May decline, on the back of weaker results in hotels, motels, caravan parks and campgrounds.

Commonwealth Bank’s chief economist Stephen Halmarick blamed tighter financial conditions, namely higher interest rates and soaring rents.

“Although the RBA held interest rates steady in early July, monetary policy in Australia is highly restrictive and this is expected to see ongoing softness in household spending in the months ahead,” he said.

“Given the lags involved with monetary policy, financial conditions are expected to continue to tighten for many Australian households well into 2024.”

Rise of generic brands

Compare the Market’s latest data suggests that many families are ditching more expensive branded products.

The company surveyed 1002 adults in June and found 72 per cent have swapped to generic-branded food at the supermarket, with the most likely categories to be swapped including cleaning products, milk, pantry staples like sauces, and bread.

Compare the Market’s Chris Ford said households are looking to mitigate the impact of high inflation on their budgets.

“Ever since inflation skyrocketed last year, we’ve seen families doing it tough and continuously try to scrape a bit of cash together to make ends meet,” Mr Ford said.

“It’s no wonder we’re seeing so many people switching from brand-name to generic items, as often this is a quick and painless way to make a few cutbacks.”