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4102.0 - Australian Social Trends, 2006  
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Contents >> Economic Resources >> Household Expenditure Patterns by Life Cycle

Household Expenditure Patterns by Life Cycle

In 2003–04, Australian households spent $893 per week on average on goods and services. Spending varied according to the number of people in the household, and with other factors such as the income of the household and the age and life cycle stage of its members. This article explores the different spending patterns associated with four types of households considered representative of particular stages in the life cycle of couple families. The different spending patterns of these households provide some insight into the impact on the household budget of changes such as having children, paying off a home mortgage, children growing older then leaving home, and retiring from work.

Proportional spending on housing generally falls over the life cycle, whereas proportional spending on food and non-alcoholic beverages tends to rise.

There are some commonly experienced stages in the progression through Australian adulthood. These include partnering and sometimes separating, raising young children, living with adult children, becoming an empty nest couple, and living alone. The stages are associated with changes in the relative importance of various broad categories of household expenditure. A household's characteristics, such as the number, age and circumstances (e.g. labour force status and income) of its members, largely shape the composition of its budget.

In 2003–04, Australian households spent $893 per week on average on goods and services. Spending varied according to the number of people in the household, and with other factors such as the income of the household and the age and life cycle stage of its members. For example, people aged 65 years or older living alone spent $351 per week on average, whereas households comprising a couple with one or more dependent children and one or more non-dependant children spent an average of $1,537 per week.

Data source and definitions

Data in this article are from the 1984 and 2003–04 ABS Household Expenditure Surveys (HES). While there are differences between these surveys which prevent precise measurement of the magnitude of change over time, it is possible to analyse broad changes in expenditure over time.

The selected life cycle groups listed in the table on this page are just some of the types of households that exist in Australian society. In 2003–04, they represented around 73% of all households.

A couple is two people who usually live in the same household and who are partners in a registered or de facto marriage.

Non-dependant children are people aged 15 years or older who live with their parent(s), do not live with a spouse or child(ren) of their own, and are not a full-time student if aged under 25 years.

For the operational definition of other technical words and phrases appearing in this article see the 'Data source and definitions' box on p.156 of the companion article Household expenditure patterns.


SPENDING ON GOODS AND SERVICES BY HOUSEHOLDS - 2003-04

Four largest broad groups of goods and services spending

Average

total weekly spending on goods and services

Food and

non-alcoholic
beverages

Current

housing costs(a)

Transport
Recreation

Selected life cycle groups
$
%
%
%
%

Lone person aged under 35
598.35
12.9
26.9
14.9
12.7
Couple only, reference person under 35
1 168.79
13.9
22.2
16.3
13.4
Couple with dependent children only, eldest child under 5
1 070.83
16.4
19.8
15.5
10.0
Couple with dependent children only, eldest child 5 to 14
1 149.57
18.1
16.9
14.4
12.2
Couple with dependent children only, eldest child 15 to 24
1 358.67
18.0
13.0
13.9
13.9
Couple with dependent & non-dependant children only
1 537.22
18.4
10.8
19.0
12.6
One parent family with dependent children
702.70
17.7
19.2
13.6
11.7
Couple with non-dependant children only
1 176.07
18.6
9.3
20.2
14.6
Couple only, reference person 55 to 64
880.53
17.4
9.3
18.0
13.3
Couple only, reference person 65 and over
614.65
20.8
9.8
15.1
15.6
Lone person 65 and over
350.78
18.2
21.0
10.5
10.4
All households
892.83
17.1
16.1
15.6
12.8

(a) For the dwelling selected in the survey only (i.e. only for a household's dwelling of usual residence).

Source: 2003–04 Household Expenditure Survey, Australia: Summary of Results (ABS cat. no. 6530.0 Reissue).

Households representing younger life cycle stages spent proportionately more on current housing costs, while proportional spending on transport was comparatively high by households comprising a couple with one or more non-dependant children. Proportional spending on food and non-alcoholic beverages was highest among older couple only households. Differences in proportional spending between these households representing various stages in the life cycle can be attributed to a range of factors including economy of scale benefits derived by larger households on their housing costs, the lower housing costs of home owners with no mortgage, and the higher income and expenditure of households with a relatively high proportion of household members employed.

This article focuses on four types of households considered representative of particular stages in the life cycle of couple families, and illustrative of how household spending patterns tend to change as a household grows older. The four life cycle stages are represented by households comprising: a couple whose reference person is aged under 35 years, a couple with one or more children whose eldest child is aged under 5 years, a couple with one or more non-dependant children, and a couple whose reference person is aged 65 years or older. The different spending patterns associated with these four life cycle stages provide some insight into the impact on the household budget of changes such as having children, paying off a home mortgage, children growing older then leaving home, and retiring from work. Similar changes often affect the spending patterns of lone person and single parent households.

Household expenditure patterns by the level of household income

As well as changing over the life cycle because of factors such as the effects of the ageing process and increasing home ownership, household spending patterns vary according to a household's level of income. Households at the same stage of the life cycle can have different expenditure patterns if their household income levels differ considerably.

In 2003–04, one family households containing a one parent family with dependent children received mean gross household income of $778 per week. One family households containing a couple family with dependent children were at a similar stage of the life cycle. These households received substantially higher mean gross household income of $1,571 per week.1

The one parent family households spent proportionately more on current housing costs than the couple family households (19% compared with 16%). Their spending was also proportionately higher on household services and operation (8% compared with 6%) and tobacco products (2% compared with 1%). On the other hand, their proportional spending was lower on miscellaneous goods and services (8% compared with 10%), medical care and health expenses (3% compared with 5%), transport (14% compared with 15%), and household furnishings and equipment (5% compared with 6%). (EndNote 1)


SELECTED CHARACTERISTICS OF SELECTED SINGLE FAMILY HOUSEHOLDS - 2003-04

Couple only, reference person under 35
Couple with dependent children only, eldest child under 5
Couple with non-dependant children only
Couple only, reference person 65 and over

Average age of reference person (years)
28
34
57
73
Average number in household (no.)
2.0
3.4
3.3
2.0
Employed persons (no.)
1.8
1.5
2.1
0.2
Persons aged 18 years and over (no.)
2.0
2.0
3.2
2.0
Owns home without a mortgage (%)
*2.3
8.0
52.8
86.3
Owns home with a mortgage (%)
54.4
62.0
38.4
4.0
Rents home (%)
39.1
27.2
7.8
8.4
Principal source of income - govt. pensions and allowances (%)
*1.6
*5.1
11.8
67.8
Mean gross household income per week ($)
1 589
1 344
1 739
620
Average weekly goods and services expenditure ($)
1 169
1 071
1 176
615
Estimated number of households in population ('000)
424.9
426.8
445.9
658.2

Source: 2003–04 Household Expenditure Survey, Australia: Summary of Results (ABS cat. no. 6530.0 Reissue).


PROPORTIONAL SPENDING(a) BY YOUNG COUPLE ONLY HOUSEHOLDS(b)

GRAPH: PROPORTIONAL SPENDING(a) BY YOUNG COUPLE ONLY HOUSEHOLDS(b)


YOUNG COUPLES

In 2003–04, there were 425,000 households comprising a couple whose reference person was aged less than 35 years. These young couple only households had comparatively high mean weekly gross income ($1,589) and goods and services expenditure ($1,169). Their actual ($259) and proportional (22%) average weekly spending on current housing costs was well above the average among all Australian households ($144 or 16%). The increase in their proportional spending on current housing costs (from 17% in 1984) was also greater than the general increase among all households (from 13% in 1984).

Levels of home ownership and public rental strongly influence current housing costs. In 2003–04, young couple only households had relatively low rates of outright home ownership (2% compared with 35% of all households) and of renting their home from a state or territory housing authority (less than 1% compared with 5%). Above average proportions were repaying a mortgage on their home (54% compared with 35% overall) and renting their home from a private landlord (37% compared with 21%).

Young couple only households also allocated a greater share of their spending than other households to the acquisition of household furnishings and equipment, which is consistent with this life cycle stage being a time during which couples often give priority to establishing a family home. However, between 1984 and 2003–04, proportional spending on household furnishings and equipment fell by a wider margin among young couple only households (11% to 7%) than among all households (8% to 6%).

Spending on transport and recreation was also relatively high for young couple only households. In 2003–04, average weekly spending per person on transport ($95) and recreation ($78) by young couple only households was higher than for all other selected life cycle groups.

While high spending is enabled by high income, other characteristics could also provide a partial explanation for relatively high spending on transport and recreation by young couple only households. For example, in 2003–04, the average number of employed people per young couple household was 1.8, and the average age of the reference person in these households was 28 years. The relative youthfulness, high probability of being employed, and childlessness of people in young couple only households suggests greater likelihood of participation in activities such as recreation, and greater use of transport to travel to these activities and to work.

The spending patterns of young couple only households tend to change with the arrival of children. While both household income and total household goods and services expenditure decrease on average, spending on some goods and services rises.


PROPORTIONAL SPENDING(a) BY COUPLE WITH YOUNG CHILD(REN)(b) ONLY HOUSEHOLDS
GRAPH: PROPORTIONAL SPENDING(a) BY COUPLE WITH YOUNG CHILD(REN)(b) ONLY HOUSEHOLDS


COUPLES WITH YOUNG CHILDREN

In 2003–04, there were 427,000 households comprising a couple and one or more children whose eldest child is aged under 5 years. The average household size for this life cycle group was 3.4 people, and mean gross household income was $1,344 per week, lower than for young couple only households. At $1,071 per week, average goods and services expenditure was also lower than spending by young couple only households. To some extent, lower income and spending can be attributed to the reduced average number of employed persons in couple with young children only households compared with young couple only households (1.5 and 1.8 persons employed respectively).

Although overall goods and services expenditure was lower, the extra people in the household were reflected in higher household spending on food and non-alcoholic beverages, medical care and health expenses, clothing and footwear, and domestic fuel and power.

The biggest proportional difference between the two life cycle groups lay in their spending on household services and operation. Included in this broad expenditure group is spending on phone calls, child care, housekeeping, cleaning, gardening, and the repair and maintenance of household durables. Whereas young couple only households spent an average of $49 per week (4% of their total goods and services expenditure) on household services and operation, couple with young children only households spent $90 or 8%. No other life cycle group spent this much on this broad expenditure group in 2003–04.

Compared with young couple only households, there was less spending by couple with young children only households on items of a more discretionary nature such as alcoholic beverages, transport, recreation, and household furnishings and equipment. Current housing costs were also lower. With the average age of the household reference person being older (34 years), a higher proportion owned their home outright (8%). Although a higher proportion also owned their home with a mortgage (62%), average mortgage interest payments were smaller as these households are generally likely to have bought their homes earlier for lower prices, and to have spent longer reducing the loan principal than more recent home buyers from young couple only households.

COUPLES WITH OLDER CHILDREN

All other factors being equal, reducing the amount of mortgage principal on the family home lowers mortgage interest charges which decreases proportional spending on current housing costs. In 2003–04, current housing costs represented just 9% of the total goods and services expenditure of households comprising a couple and one or more non-dependant children. These households tend to be considerably older than couple with young children only households, and have a much higher rate of home ownership.


PROPORTIONAL SPENDING(a) BY COUPLE WITH NON-DEPENDANT CHILD(REN) ONLY HOUSEHOLDS
GRAPH: PROPORTIONAL SPENDING(a) BY COUPLE WITH NON-DEPENDENT CHILD(REN) ONLY HOUSEHOLDS


In 2003–04, there were 446,000 couple with non-dependant children only households. The average age of their reference person was 57 years, and the majority (53%) owned their home without a mortgage. A further 38% were repaying a mortgage, while only 8% were renting their home.

Their mean gross household income per week ($1,739) was higher than the average income of couple with young children only households. Higher household income is likely to be related to the different composition (e.g. number of income earners) and characteristics (e.g. age of members) of households representing these two life cycle stages. While average household size (3.3 people) was slightly smaller, the average number of members aged 18–64 years (2.9), and the average number of employed persons per household (2.1) was greater in couple with non-dependant children only households.

In both 1984 and 2003–04, transport was the largest broad group of goods and services expenditure for this life cycle stage. In 2003–04, couple with non-dependant children only households spent an average of $237 per week on transport. This represented 20% of their total spending on goods and services. Increased household spending on transport is likely to be associated with having more pre-retirement age adults, and more employed people, in the household. Independent children living with their parents often purchase, operate and maintain a motor vehicle of their own to travel to work, education and social events.

Couple with non-dependant children only households also spent proportionately more on food and non-alcoholic beverages, recreation, tobacco products, personal care, and medical care and health expenses than households representing the younger life cycle stages previously examined in this article. However, average per person spending was not necessarily higher. The only broad groups of goods and services expenditure on which couple with non-dependant children only households spent more per person were medical care and health expenses ($19 per week on average) and tobacco products ($7 per adult per week on average).

OLDER COUPLES

The share of the household budget allocated to the various broad expenditure groups differs when household income is substantially lower. Relatively low household income is often associated with relatively high proportional spending on more basic, less discretionary items. The age of household members also influences spending requirements and preferences.

In 2003–04, there were 658,000 households comprising a couple whose reference person was aged 65 years or older. These older couple only households had an average of 0.2 employed persons, and 68% of them relied on government pensions and allowances as their principal source of household income. This rate of income support was much higher than prevailed among the three younger life cycle groups examined in this article (all less than 12%). Consequently, older couple only households had comparatively low gross income ($620 per week on average). Their total spending on goods and services was also much lower (at $615 per week on average) than households representing the three younger life cycle stages.


PROPORTIONAL SPENDING(a) BY OLDER COUPLE ONLY HOUSEHOLDS(b)
GRAPH: PROPORTIONAL SPENDING(a) BY OLDER COUPLE ONLY HOUSEHOLDS(b)


Compared to couple with non-dependant children only households, older couple only households spent a similar share of their goods and services budget on current housing costs. This was despite their considerably higher rate of outright home ownership (86% compared with 53%) and their much lower average weekly spending on current housing costs ($61 compared with $110). Similar proportional spending by older couple only households largely reflects their relatively low income covering the numerous fixed housing costs payable by home owners. Such fixed costs include water and sewerage rates and charges, local government rates, house and contents insurance, repairs and maintenance, and body corporate payments.

Unlike other selected life cycle groups, proportional spending on current housing costs by older couple only households decreased between 1984 and 2003–04. Over the same period, their proportional spending on recreation increased by a greater margin (from 12% in 1984 to 16% in 2003–04) than it did for other selected life cycle groups.

In 2003–04, older couple only households spent proportionately more on food and non-alcoholic beverages (21%) than any other selected life cycle group. However, actual spending per person on food and non-alcoholic beverages was similar in older couple only households to what it was in couple with non-dependant children only households. Older couple only households also spent proportionately more than couple with non-dependant children only households on domestic fuel and power, household furnishings and equipment, household services and operation, medical care and health expenses, and recreation.

Of the four life cycle groups examined in this article, older couple only households were the group that spent proportionately the most on recreation (16%), medical care and health expenses (8%), and domestic fuel and power (3%). They were also the life cycle group that spent proportionately the least on transport (15%), miscellaneous goods and services (7%), clothing and footwear (3%), and tobacco products (less than 1%).

ENDNOTES

    1. Australian Bureau of Statistics 2006, Household Expenditure Survey, Australia: Summary of Results, 200304 (ABS cat. no. 6530.0 Reissue), ABS, Canberra.

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