Restaurants and travel could be in for a tough 2024 with an economist forecasting a major shift from services to goods spending

Restaurants and travel operators could be in for a tough year with an economist forecasting a major shift in the way Aussies spend their money in 2024.

Mastercard’s chief economist, Asia Pacific, David Mann told news.com.au that while cost of living pressures will continue to curb overall spending levels, there is also evidence that Aussies will redirect their discretionary spending away from services and back towards buying goods.

Mr Mann said the spending shift spells bad news for hospitality and travel businesses, which have benefited in recent years from Aussies seeking out missed experiences following pandemic lockdowns.

“For at least two years under pandemic restrictions, we saw elevated spending on goods,” the credit card giant said in its 2024 Economic Outlook Report.

“But in 2022 and 2023, services outperformed manufacturing as the reopening of economies globally allowed for the release of pent-up consumer demand to get out and about.”

Mr Mann said that the high cost of travel and eating out in an inflationary environment has also started to affect consumer spending in this area and that in 2024 the spending mix is set to return to a more typical balance between goods and services.

But he warned retailers not to pop the champagne corks just yet, with soft overall spending forecast for Australia due to the high cost of living, despite rising wages and low unemployment.

“It’ll be a year of softer growth where those key trade offs will still be upon us,” Mr Mann said, adding that Australians will continue to focus on bargain hunting, sales and deals.

Evidence of the shift towards goods and a focus on value can be seen in the November retail sales figures, released this week.

The data from the Australian Bureau of Statistics (ABS) shows retail sales rose two per cent to $36.5 billion in November, well ahead of market expectations of a 1.2 per cent increase.

This follows a fall of 0.4 per cent in October 2023 and a rise of one per cent in September 2023.

The ABS said Black Friday sales, which started earlier and ran for longer than in previous years, were a major contributor to the November sales increase.

“The strong rise suggests that consumers held back on discretionary spending in October to take advantage of discounts in November,” said Robert Ewing, head of business statistics at the ABS.

“Shoppers may have also brought forward some Christmas spending that would usually happen in December.”

Household goods retailing rose 7.5 per cent in November, followed by a 4.2 per cent increase in department store spending and a 2.7 per cent increase in clothing, footwear and personal accessory retailing.

By contrast, spending at cafes, restaurants and takeaway food services only increased 0.4 per cent in November.

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