By Poppy Johnston in Canberra

Even with essentials such as petrol and power bills chewing up less of the household budget, younger Australians are still making sacrifices and cutting back more than older generations. 

Those aged between 18 and 29 reduced spending by two per cent over the past year, based on analysis of de-identified transactions made by Commonwealth Bank customers.

Those aged between 30 and 39 recorded a smaller 1.1 per cent drop in spending, whereas those aged 60-69 increased spending by 3.9 per cent.

“Lower petrol prices and government energy relief programs have eased the pressure on essential spending and July’s income tax cuts have increased take home pay for many Australians, however there continues to be a discrepancy between the spending power of older and younger Australians,” CommBank iQ head of innovation and analytics Wade Tubman said.

“In fact, we’ve seen those all the way up to 40 years old cut back on spending, highlighting the large swathe of the population feeling cost of living pressure.”

Gen Z and Millennials were more likely than older cohorts to worry about affording Christmas presents, separate surveying shows.

The survey from charity Good360 Australia leading up to the festive season found 58 per cent of those aged 25 to 35 were concerned about finding the money to buy gifts.

Housing costs play a part in the generational divide, with younger people more likely to be renting or paying off a mortgage.

Borrowers have been enduring higher monthly home loan repayments as the Reserve Bank of Australia keeps interest rates up to stamp out inflationary pressures.

In a lecture delivered on Monday evening, the central bank’s assistant governor (financial markets) Christopher Kent said Australian borrowers were particularly sensitive to interest rate moves because most had variable rate mortgages or short fixed-term loans.

The dominance of variable rate mortgages makes Australia an outlier internationally, he said.

In the United States, for example, 30-year fixed term loans were common.

Yet Australian mortgage-holders were falling behind on their repayments about the same rates as economies with more fixed-rate lending, Mr Kent observed in his Sir Leslie Melville Lecture at the Australian National University.

Hefty financial buffers explained the resilience of Australian borrowers, he said, with serviceability rules applied to lending and households able to build up savings during the pandemic.

“… although many borrowers have struggled in the face of rising interest rates over the past two years or so, and household spending more broadly has weakened noticeably,” he said in his speech.

Despite the understandable focus on variable rate borrowers in Australia, Mr Kent said there was “no evidence that monetary policy overall is more potent in Australia than in other advanced economies”.

His speech fell ahead of the minutes from the last board meeting, where interest rates were kept on hold and another hike was not ruled out.

Yet markets and economists expect the next move to be down.

Three of the big four banks are expecting easing to start in February yet NAB broke rank last week to push its forecasts back to May, citing resilience in the labour market as a factor.

The minutes will be scoured for further insights into the central bank’s thinking and understanding of the economy.