1 00:00:03,960 --> 00:00:07,500 Sean Aylmer: Welcome to the Fear and Greed Daily Interview, I'm Sean Aylmer. We 2 00:00:07,500 --> 00:00:10,079 Sean Aylmer: talk a lot about the cost of living crisis, but 3 00:00:10,080 --> 00:00:13,020 Sean Aylmer: now we've got an insight into how it's actually affecting 4 00:00:13,020 --> 00:00:17,190 Sean Aylmer: households and individuals across the country, the people who are 5 00:00:17,190 --> 00:00:20,430 Sean Aylmer: being hardest hit and the changes they're making to their 6 00:00:20,430 --> 00:00:24,540 Sean Aylmer: spending habits. The insights come from CommBank iQ, a joint 7 00:00:24,540 --> 00:00:29,429 Sean Aylmer: venture between Commonwealth Bank and AI company Quantium, and uses de- 8 00:00:29,429 --> 00:00:33,958 Sean Aylmer: identified data from 7 million Commonwealth Bank customers to track 9 00:00:33,960 --> 00:00:38,278 Sean Aylmer: changes in spending. Wade Tubman is the CommBank iQ Head of 10 00:00:38,280 --> 00:00:41,250 Sean Aylmer: Innovation and Analytics. Wade, welcome to Fear and Greed. 11 00:00:41,580 --> 00:00:42,540 Wade Tubman: Thank you for having me. 12 00:00:43,110 --> 00:00:44,790 Sean Aylmer: How much fun is it having a data set of 13 00:00:44,790 --> 00:00:47,910 Sean Aylmer: 7 million de- identified people? 14 00:00:48,780 --> 00:00:52,019 Wade Tubman: It is a privilege. It always reminds me of Spider- 15 00:00:52,019 --> 00:00:55,019 Wade Tubman: Man, with great power comes great responsibility. 16 00:00:55,259 --> 00:00:55,260 Sean Aylmer: Yes. 17 00:00:55,260 --> 00:00:58,650 Wade Tubman: But no, we do have great power, but equally, we take 18 00:00:58,890 --> 00:01:02,130 Wade Tubman: the privacy and data security very seriously as well. 19 00:01:02,880 --> 00:01:06,629 Sean Aylmer: So just broadly, before we get into the specifics, what 20 00:01:07,020 --> 00:01:10,260 Sean Aylmer: is it showing? So the report you have done and 21 00:01:10,260 --> 00:01:14,280 Sean Aylmer: it's released today, what are the top- line figures it's showing? 22 00:01:15,720 --> 00:01:18,539 Wade Tubman: I think overall the message out of the report is there 23 00:01:18,540 --> 00:01:22,649 Wade Tubman: isn't one thing to point at, in our economy, in 24 00:01:22,650 --> 00:01:25,380 Wade Tubman: our community, where things are going well and things are 25 00:01:25,380 --> 00:01:27,809 Wade Tubman: going bad. So it really depends on a number of 26 00:01:27,809 --> 00:01:31,500 Wade Tubman: individual factors in your life; what age you are, what 27 00:01:31,500 --> 00:01:34,319 Wade Tubman: your income is, what life stage you're at, whether you 28 00:01:34,319 --> 00:01:37,110 Wade Tubman: have children, whether you own or rent. All of those 29 00:01:37,110 --> 00:01:41,130 Wade Tubman: things are personal to you and they really affect, one, 30 00:01:41,130 --> 00:01:44,069 Wade Tubman: how cost of living pressures hit you, but two, I 31 00:01:44,069 --> 00:01:46,529 Wade Tubman: guess, what levers you have to respond it. How can 32 00:01:46,529 --> 00:01:50,160 Wade Tubman: you change your spending? How can you change your day- to- 33 00:01:50,160 --> 00:01:53,460 Wade Tubman: day life to make ends meet? So if there was 34 00:01:53,970 --> 00:01:55,890 Wade Tubman: one thing to come out of this research is that 35 00:01:56,340 --> 00:01:59,400 Wade Tubman: the danger of averages and not everyone is the same 36 00:01:59,400 --> 00:01:59,760 Wade Tubman: out there. 37 00:01:59,790 --> 00:02:02,640 Sean Aylmer: Okay, so let's dive into that a little bit. And 38 00:02:02,910 --> 00:02:04,740 Sean Aylmer: now I'm going straight to averages, which you've just said 39 00:02:04,740 --> 00:02:06,269 Sean Aylmer: don't do that, but I'm going to anyway just to 40 00:02:06,270 --> 00:02:11,070 Sean Aylmer: begin with. The whole idea of essential versus discretionary spend. 41 00:02:11,400 --> 00:02:15,720 Sean Aylmer: There was some interesting findings, depending on age groups, about 42 00:02:15,929 --> 00:02:19,619 Sean Aylmer: discretionary and essential spend, particularly given that the cost of 43 00:02:19,620 --> 00:02:24,090 Sean Aylmer: living crisis that's going on, it wasn't immediately obvious what 44 00:02:24,090 --> 00:02:25,169 Sean Aylmer: these outcomes would be. 45 00:02:25,860 --> 00:02:29,910 Wade Tubman: Yeah, absolutely. I think discretionary versus essential spend is one 46 00:02:29,910 --> 00:02:33,389 Wade Tubman: that economists will often go to have a look at 47 00:02:33,389 --> 00:02:36,630 Wade Tubman: how people are feeling. And in the normal world, in 48 00:02:36,630 --> 00:02:41,159 Wade Tubman: normal times, people tend to retreat away from discretionary spend 49 00:02:41,160 --> 00:02:44,340 Wade Tubman: into essential categories. So an example of that might be 50 00:02:44,970 --> 00:02:49,260 Wade Tubman: you'll forego new clothes, new cars, things like that, to 51 00:02:49,260 --> 00:02:52,259 Wade Tubman: focus in on putting food on the table, putting shelter 52 00:02:52,260 --> 00:02:55,559 Wade Tubman: above your head. That's a common thing, it's probably been 53 00:02:55,559 --> 00:02:58,499 Wade Tubman: around for hundreds of years. But we're coming off the 54 00:02:58,500 --> 00:03:02,669 Wade Tubman: back of probably the most dramatic change in a long 55 00:03:02,669 --> 00:03:06,180 Wade Tubman: while with COVID. And what we're starting to see and what we 56 00:03:06,180 --> 00:03:09,179 Wade Tubman: are seeing is that despite the fact that that's what 57 00:03:09,179 --> 00:03:11,460 Wade Tubman: we would expect people to do when these cost of 58 00:03:11,460 --> 00:03:15,508 Wade Tubman: living pressures hit, we're actually seeing almost the opposite. It's 59 00:03:15,508 --> 00:03:20,548 Wade Tubman: quite counterintuitive. We're seeing consumers starting to preference or continuing 60 00:03:20,550 --> 00:03:24,600 Wade Tubman: to preference a lot of discretionary spend categories. So an 61 00:03:24,600 --> 00:03:27,300 Wade Tubman: example of that that we're seeing is there is very 62 00:03:27,300 --> 00:03:31,198 Wade Tubman: strong preference of consumers out there to continue to spend 63 00:03:31,200 --> 00:03:37,079 Wade Tubman: on travel, holidays, accommodation, eating out, entertainment, so we're talking 64 00:03:37,079 --> 00:03:42,450 Wade Tubman: concerts, movies, the local fair, but at the same time, 65 00:03:42,450 --> 00:03:46,050 Wade Tubman: being frugal on a whole bunch of other categories. They're 66 00:03:46,050 --> 00:03:50,129 Wade Tubman: being frugal on keeping their house with the latest tech. 67 00:03:50,460 --> 00:03:52,920 Wade Tubman: We're seeing them be frugal on their clothing, we're seeing 68 00:03:52,920 --> 00:03:57,330 Wade Tubman: them even cut back on some things like insurance and 69 00:03:57,330 --> 00:04:01,050 Wade Tubman: utilities. So it's very different and quite unexpected. 70 00:04:01,800 --> 00:04:04,320 Sean Aylmer: Another thing which jumps out at me and anyone that 71 00:04:04,410 --> 00:04:07,530 Sean Aylmer: looks at the report, I mean, whoever your graphic artist 72 00:04:07,530 --> 00:04:10,500 Sean Aylmer: who did this, your creative services team did a fantastic 73 00:04:10,500 --> 00:04:14,490 Sean Aylmer: job because you're presenting this information in really interesting ways. Something 74 00:04:14,490 --> 00:04:19,170 Sean Aylmer: that just came through though is the great difference between 75 00:04:19,170 --> 00:04:22,830 Sean Aylmer: being a renter and a household owner. Even if you've 76 00:04:22,830 --> 00:04:27,120 Sean Aylmer: got a massive mortgage, it just seems that much, much 77 00:04:27,120 --> 00:04:28,020 Sean Aylmer: tougher when you're renting. 78 00:04:28,440 --> 00:04:32,039 Wade Tubman: Yeah, so a couple of things that are going on here. First of 79 00:04:32,040 --> 00:04:34,830 Wade Tubman: all, I think renters, at least from what I read 80 00:04:34,830 --> 00:04:38,219 Wade Tubman: in the media, are a bit of a forgotten group. 81 00:04:38,220 --> 00:04:40,049 Wade Tubman: We do hear about the housing crisis and we all 82 00:04:40,050 --> 00:04:42,268 Wade Tubman: know that rents are up, but I guess that we 83 00:04:42,270 --> 00:04:45,539 Wade Tubman: forget, or often forget, a third of our population rents 84 00:04:45,870 --> 00:04:48,688 Wade Tubman: and rents are seeing some of the highest growth that 85 00:04:48,750 --> 00:04:52,289 Wade Tubman: we've probably seen in a long while. And definitely there's 86 00:04:52,290 --> 00:04:54,089 Wade Tubman: a lot of people out there in our communities who 87 00:04:54,089 --> 00:04:57,899 Wade Tubman: are renting, that every time that rent review comes around 88 00:04:57,900 --> 00:05:00,599 Wade Tubman: and those rents go up, it just puts them under 89 00:05:00,660 --> 00:05:03,720 Wade Tubman: more and more pressure. So I think that's one takeout. 90 00:05:04,080 --> 00:05:06,809 Wade Tubman: And the other probably comes down to, again, this danger 91 00:05:06,809 --> 00:05:09,630 Wade Tubman: of averages, where at least in this version of the 92 00:05:09,630 --> 00:05:12,359 Wade Tubman: report, we look at homeowners as an overall group. And 93 00:05:12,750 --> 00:05:16,350 Wade Tubman: there's some very different sub- segments in there. While homeowners 94 00:05:16,380 --> 00:05:19,619 Wade Tubman: as an overall group aren't necessarily feeling as much pressure 95 00:05:19,620 --> 00:05:22,770 Wade Tubman: as renters, as you pointed out, if you dive into 96 00:05:22,770 --> 00:05:26,940 Wade Tubman: homeowners, there's a number of subgroups in there. So first of 97 00:05:26,940 --> 00:05:29,610 Wade Tubman: all, not everyone that owns a home has a mortgage. 98 00:05:29,970 --> 00:05:32,039 Wade Tubman: Certainly, as you get onto some of those older life 99 00:05:32,040 --> 00:05:35,490 Wade Tubman: stages and older ages, some of them have cleared their 100 00:05:35,490 --> 00:05:38,729 Wade Tubman: mortgages. And of the people that do have mortgages, everyone 101 00:05:38,730 --> 00:05:41,579 Wade Tubman: is at a different stage as well. So you have situations 102 00:05:41,580 --> 00:05:44,490 Wade Tubman: where, right now, looking at our data, we could see 103 00:05:44,490 --> 00:05:47,970 Wade Tubman: that of mortgage holders, a third of them actually have 104 00:05:48,000 --> 00:05:51,539 Wade Tubman: substantial buffers built in. They've had their mortgage for a 105 00:05:51,540 --> 00:05:54,120 Wade Tubman: while, they've built up, whether it be in their offset 106 00:05:54,120 --> 00:05:57,299 Wade Tubman: account or they've built up a balance that they can 107 00:05:57,299 --> 00:06:00,569 Wade Tubman: redraw, and so a third of all mortgage holders actually, 108 00:06:00,569 --> 00:06:04,620 Wade Tubman: while their repayments are going up, they've got these buffers in 109 00:06:04,620 --> 00:06:07,140 Wade Tubman: there. They can just go into their internet banking and 110 00:06:07,740 --> 00:06:11,070 Wade Tubman: draw down or fix it up for a period, at 111 00:06:11,070 --> 00:06:13,739 Wade Tubman: least for a couple of years. But then we have 112 00:06:13,740 --> 00:06:16,169 Wade Tubman: a look at a group, and unfortunately, there is a 113 00:06:16,170 --> 00:06:19,440 Wade Tubman: third of mortgage holders who have no buffers. And this 114 00:06:19,440 --> 00:06:22,320 Wade Tubman: is the group that are really feeling this out in 115 00:06:22,320 --> 00:06:26,969 Wade Tubman: our communities, and they're really having to pull all these other 116 00:06:26,970 --> 00:06:29,880 Wade Tubman: levers because you don't want to be moving out of 117 00:06:29,880 --> 00:06:32,188 Wade Tubman: your house and you don't want to be defaulting on 118 00:06:32,190 --> 00:06:34,949 Wade Tubman: your mortgage. So you start pulling more and more levers 119 00:06:34,949 --> 00:06:38,219 Wade Tubman: in your expenditure because you've got no buffers left on 120 00:06:38,220 --> 00:06:40,320 Wade Tubman: the mortgage and you've exhausted your savings. 121 00:06:40,950 --> 00:06:42,840 Sean Aylmer: Stay with me, Wade. We'll be back in a minute. 122 00:06:48,779 --> 00:06:51,839 Sean Aylmer: My guest this morning is Wade Tubman, CommBank iQ Head 123 00:06:51,839 --> 00:06:55,859 Sean Aylmer: of Innovation and Analytics. Another chart which I think is 124 00:06:55,860 --> 00:06:58,380 Sean Aylmer: quite amazing was a graph, is the year- on- year 125 00:06:58,380 --> 00:07:01,620 Sean Aylmer: spending changes by age. Now, if we just park the 126 00:07:01,620 --> 00:07:03,990 Sean Aylmer: 18 to 24- year- olds, that's my household, I've got 127 00:07:03,990 --> 00:07:06,120 Sean Aylmer: a house full of 18 to 24- year- olds, none of them 128 00:07:06,120 --> 00:07:09,899 Sean Aylmer: are leaving home soon, they're still spending. But once you 129 00:07:09,900 --> 00:07:14,310 Sean Aylmer: get beyond that, 25 to 29, 30 to 34, then right through 130 00:07:14,310 --> 00:07:18,930 Sean Aylmer: to 75 plus, it is quite remarkable how the younger 131 00:07:18,930 --> 00:07:23,249 Sean Aylmer: you are, parking that first group, the less you're spending 132 00:07:23,520 --> 00:07:26,580 Sean Aylmer: or the spend per capita is nowhere near as big 133 00:07:26,580 --> 00:07:29,129 Sean Aylmer: a jump as a 60- year- old, for example. 134 00:07:29,730 --> 00:07:33,270 Wade Tubman: Yeah, absolutely. You couldn't hope for a better chart than this. I'm 135 00:07:33,270 --> 00:07:35,002 Wade Tubman: an actuary by background, so I love it (inaudible) . 136 00:07:35,160 --> 00:07:35,820 Sean Aylmer: You'd love this one. 137 00:07:35,820 --> 00:07:39,989 Wade Tubman: When a chart comes out this. It's even got the, in actuarial terms, we 138 00:07:39,990 --> 00:07:42,660 Wade Tubman: call that the accident hump, the 18 to 24- year- olds. 139 00:07:42,660 --> 00:07:42,720 Sean Aylmer: Yeah. 140 00:07:43,290 --> 00:07:48,149 Wade Tubman: So yeah, absolutely. Again, this is just averages, remember. We're 141 00:07:48,150 --> 00:07:52,020 Wade Tubman: not saying that every 65- year- old is having a 142 00:07:52,020 --> 00:07:55,170 Wade Tubman: great time, it depends on all those circumstances. But as 143 00:07:55,170 --> 00:07:59,789 Wade Tubman: a view through our population, absolutely, the younger people, and 144 00:08:00,270 --> 00:08:02,790 Wade Tubman: from our data, we see that pretty much anyone under 145 00:08:02,790 --> 00:08:06,719 Wade Tubman: the age of 54 is not keeping pace with inflation. 146 00:08:07,080 --> 00:08:10,679 Wade Tubman: Their spending in dollar terms is going up, but their 147 00:08:10,680 --> 00:08:14,220 Wade Tubman: consumption, the number of things that they're buying, whether it 148 00:08:14,220 --> 00:08:16,830 Wade Tubman: be the number of bananas or the number of T- 149 00:08:16,830 --> 00:08:20,070 Wade Tubman: shirts, is less, it's not keeping pace with inflation. And 150 00:08:20,070 --> 00:08:23,009 Wade Tubman: so that's a big chunk of our population. It depends 151 00:08:23,010 --> 00:08:25,830 Wade Tubman: on what you consider to be young, but yeah, under 152 00:08:25,830 --> 00:08:30,480 Wade Tubman: 54 is definitely well out of step with over 55s. 153 00:08:30,930 --> 00:08:32,849 Wade Tubman: And in particular in our report, we call out the 154 00:08:32,849 --> 00:08:36,900 Wade Tubman: under 35s. And the under 35s are definitely feeling a 155 00:08:36,900 --> 00:08:40,859 Wade Tubman: lot more. They're in those formative years, they're starting to 156 00:08:40,859 --> 00:08:44,760 Wade Tubman: move out of home in those mid- 20s, they're maybe 157 00:08:44,760 --> 00:08:49,020 Wade Tubman: getting their first home, they're renting, potentially starting to build 158 00:08:49,020 --> 00:08:52,199 Wade Tubman: families through the 20s, and yeah, we're seeing it very 159 00:08:52,200 --> 00:08:55,828 Wade Tubman: clearly that their expenditure, the lever they're pulling is a 160 00:08:55,830 --> 00:08:58,260 Wade Tubman: big one. They're just cutting back pretty much across the 161 00:08:58,260 --> 00:09:02,220 Wade Tubman: board. We do call out that, in particular, some discretionary 162 00:09:02,220 --> 00:09:05,880 Wade Tubman: items like apparel, they're very much cutting back on. In 163 00:09:05,880 --> 00:09:10,649 Wade Tubman: real terms, we're probably talking maybe - 15 to - 20%, which 164 00:09:10,650 --> 00:09:14,070 Wade Tubman: is a large reduction in real terms. But yeah, across 165 00:09:14,070 --> 00:09:17,699 Wade Tubman: the board, they're really starting to pull those consumption levers 166 00:09:17,699 --> 00:09:21,000 Wade Tubman: to meet, I guess, the stress of this change. 167 00:09:22,559 --> 00:09:25,439 Sean Aylmer: Apparel's interesting because it is such a big drop. Is 168 00:09:25,440 --> 00:09:28,020 Sean Aylmer: it something that we should be worried about? 169 00:09:28,469 --> 00:09:32,040 Wade Tubman: I think it really depends on, if you're talking about 170 00:09:32,040 --> 00:09:34,770 Wade Tubman: the business community, what type of business you're in. And 171 00:09:35,250 --> 00:09:37,139 Wade Tubman: I keep going on about the danger of averages, but 172 00:09:37,710 --> 00:09:41,130 Wade Tubman: I'm not saying out there that every apparel business is 173 00:09:41,610 --> 00:09:44,730 Wade Tubman: in danger, it really depends on your customer base. And 174 00:09:44,730 --> 00:09:47,699 Wade Tubman: so again, if we think across all these different dimensions, 175 00:09:47,910 --> 00:09:51,299 Wade Tubman: if you're a business who focuses your apparel in on 176 00:09:51,599 --> 00:09:54,510 Wade Tubman: maybe the under 30 market, you're trying to focus on 177 00:09:54,510 --> 00:09:59,100 Wade Tubman: SINKs and DINKs, and maybe at certain price points to appeal 178 00:09:59,100 --> 00:10:03,719 Wade Tubman: to either mainstream or even budget shoppers, then the data 179 00:10:03,719 --> 00:10:07,019 Wade Tubman: here is saying that those customers are retreating from apparel 180 00:10:07,139 --> 00:10:10,619 Wade Tubman: at quite a high level. But equally, if you're a 181 00:10:10,619 --> 00:10:14,100 Wade Tubman: brand that has more broad appeal or a brand that 182 00:10:14,220 --> 00:10:17,550 Wade Tubman: potentially appeals to some of the older age groups, you 183 00:10:17,550 --> 00:10:19,710 Wade Tubman: might not be seeing an effect at all, or in 184 00:10:19,710 --> 00:10:22,170 Wade Tubman: fact, anything. You could even be seeing an increase of 185 00:10:22,170 --> 00:10:25,348 Wade Tubman: sales. And anecdotally, talking to our clients, we are starting 186 00:10:25,349 --> 00:10:30,208 Wade Tubman: to see that polarization across different brands. Or for some 187 00:10:30,208 --> 00:10:32,940 Wade Tubman: of the conglomerates, within their group or within their brand. 188 00:10:33,720 --> 00:10:36,390 Sean Aylmer: Fascinating, Wade. Thank you for talking to Fear and Greed. 189 00:10:36,809 --> 00:10:37,920 Wade Tubman: Thank you for having me. 190 00:10:38,370 --> 00:10:41,820 Sean Aylmer: That was Wade Tubman, CommBank iQ Head of Innovation and 191 00:10:41,820 --> 00:10:44,759 Sean Aylmer: Analytics. This is the Fear and Greed Daily Interview. Join 192 00:10:44,759 --> 00:10:46,799 Sean Aylmer: us every morning for the full episode of Fear and 193 00:10:46,799 --> 00:10:50,610 Sean Aylmer: Greed, Australia's most popular business podcast. I'm Sean Aylmer, enjoy 194 00:10:50,610 --> 00:10:51,000 Sean Aylmer: your day.