Home loan buffers eyed as bank customers squeeze spending

Bankwest has encouraged any of its customers experiencing difficulties to get in touch with the bank “as soon as possible” for support, given its latest customer spending data showing a stark austere change.

The spending stall has appeared in Bankwest’s latest Spend Trends analysis for October, revealing cost of living and inflationary pressures appear to be finally restricting Western Australian consumers.

Bankwest had tracked its Western Australian customer credit and debit transactions since the beginning of the pandemic and the subsequent recovery period to provide “insights into the community response to changing economic conditions”, it explained.

According to the bank, owned by Commonwealth Bank Australia (CBA), its report showed a reluctance from Western Australian consumers to rein in spending in discretionary sectors despite “rising inflation being apparent in the volume and value of transactions being made.”

“That inflation could be seen in the year-on-year data, with a significant outpacing of the value of spending (+25 per cent) compared to the number of customers spending (+4 per cent), and the volume of transactions (+6 per cent),” it outlined.

However, the analysis for October showed a “complete reversal of recent trends”, with the number of customers, average total spend, and total volume of transactions all stabilising at 1 per cent growth month-on-month, it has reported.

Areas where the pinch is kicking in

As Bankwest explained, key areas in which Western Australians pulled back were travel — with airlines, auto rental, hotel/motel, and travel agencies all stagnant or declining month-on-month — plus clothing and department stores and restaurants and bars experiencing the drop.

Western Australians also began responding to the ongoing price pinch of petrol by pulling back at the bowser, with the number of customers transacting (-4 per cent) and the volume of transactions (-2 per cent) contracting from September, Bankwest confirmed.

However, the return of the fuel excise levy at the end of September, which added about 25.3¢ a litre to the cost of petrol and diesel, coupled with existing high prices, resulted in the value of transactions rising (2 per cent), it said.

Home loan buffers under threat?

Bankwest general manager for everyday banking, Philippa Costanzo, said: “We know Western Australians are in a period of economic uncertainty, but until recently there was a reluctance to rein in discretionary spending.

“Bankwest data from May this year showed more than 90 per cent of home loan customers were ahead on their repayments by about three years, while savings balances across all financial institutions increased through COVID-19.

“That enabled many people to build a financial buffer that protected them from the rising cost-of-living and inflationary headwinds, and there was little evidence of an urgency in the community to alter spending behaviours.

“However, these latest Spend Trends figures suggest the reality of the current economic climate is becoming more apparent to Western Australians, with discretionary spend reined in, and purchases becoming more specific.

“We expect a challenging financial environment to remain for some time to come, and we encourage any customers experiencing difficulties to get in touch with us as soon as possible so we can support them.”

Don’t ditch it, fix it!

Bankwest’s data also indicated the cost-of-living pressures appeared to be creating a ‘repair instead of replace’ mentality, with repair shops, which include device, machine, watch, and footwear repairers increasing in transactions month-on-month.

The rise coincided with a fall in the number of customers spending (-2 per cent) and the volume of transactions (-3 per cent) at electrical appliance retailers, further supporting Western Australians embracing ‘repair instead of replace’, the bank proffered.

Additionally, the analysis revealed a trend across discount and hardware stores, as both rose in customers, spend, and volume month-on-month, which could be attributed to retailers beginning Christmas decoration sales, it said.

Figures from the Federal Chamber of Automotive Industries showed Western Australia’s October car sales up year-on-year and Bankwest said its latest Spend Trends data supported that in average total spend, month-on-month (5 per cent), and year-on-year (8 per cent).

[Related: Rate rises fuel savings frenzy]