10-05-2025
Classic Aussie rituals we can no longer afford
ANALYSIS
Another long weekend, another trip to the pub, another long soul-searching think about whether a parmigana is even worth it these days.
The price of a humble counter meal is at a level that is making Australians uncomfortable.
We know how much money we make, how much our bills cost, and how much is left over.
And – tell me if I'm wrong here – that delicious slab of chicken, ham and cheese is going to eat up much more of the leftover money than feels right.
The arithmetic of it all
Wages are rising. A little bit. Incomes are rising too, and actually more than wages, because the number of hours worked is up quite a lot. But here's the problem: prices are up too.
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This next chart shows how it shakes out. When you look at disposable income vs. inflation, inflation has won the last couple of years.
Disposable income is important to think about because a huge amount of our income is disappearing into tax and mortgage repayments.
It leaves a lot less for disposing (i.e. spending!) on other things.
When you get to that list of 'other things', boy, is that unpleasant. You want to go and buy a burger, but first you need to pay some of the boring things.
Like your car insurance. My insurer sent me a quote for next year's insurance a little while ago and it was up over 15 per cent on the year before, as the pic below shows – even though they're insuring a lower value for my car, (a basic family wagon).
I don't feel very lucky about being with my insurer these days actually. I'm going to shop around a bit before I pay that bill, for sure.
The same is happening with mortgage repayments and rents – they have risen crazy amounts over the last three years and they are killing our disposable income. Prices in lots of non-discretionary categories are rising, which leaves much less money for the discretionary stuff. And the discretionary stuff is the fun stuff.
The unbearably high price of having a moderately nice time
My local coffee shop is good, a bit fancy I suppose, but even still I was blown away to pay over $6 for a large flat white recently.
There was a time, not that long ago when I felt a bit awkward about just buying coffee at a coffee shop, especially if I sat in there for a while with my computer.
I would usually order some toast or eggs to sort of pay a bit of rent. But that was when a coffee cost a few coins.
These days I'm often happy to just have a hot drink. To be clear, I'm not blaming the coffee shop owner.
I believe the rising price of a cup of coffee is a sign they are struggling, not a sign they are greedy.
The cost of coffee beans has gone crazy – as the next chart shows – and the number of customers has fallen.
If you need to make $100 margin on coffees a day to cover rent and you're selling 100 cups of coffee, the mark-up only needs to be $1.
But if demand falls to 50 cups of coffee a day then you have to make the margin $2 per cup, which puts off more customers. It's a brutal equation.
The struggle to enjoying a bit of discretionary spending is not evenly distributed.
Older people who have paid off their home can still go for a pub dinner without blinking, but younger people are in struggle town.
If I had a hospitality business aimed at young hipsters, I'd be panicking.
The Commonwealth Bank collates excellent data on the spending habits of people depending on their home ownership status, and they find renters are dragging along the bottom, when they used to be the most extravagant.
A world where a 20-something can't easily go out to the pub is a world that's got a lot worse, and that will come with consequences – not least of which could be the next election.
Both major parties could be in for a shock.
