The cost-of-living squeeze is showing up at the dinner table
- Written by: The Times
The Reserve Bank wants Australians to spend less so inflation can come down. For a household, that can mean cancelling dinner. For the restaurant, it can mean cutting a shift. At the big end of town, there is more room to wait it out.
A family that used to go out for dinner twice a month goes once. A couple keeps the Saturday booking but orders by the glass and skips dessert. Friends who used to meet at a restaurant take turns cooking at home.
Each is a small decision. Put enough of them together and a restaurant owner can see the effect of higher interest rates in the booking diary.
That makes restaurants a litmus test for Australia’s cost-of-living squeeze. A mortgage payment has a due date. The car still needs fuel. Dinner out is one expense a household can change this weekend, without a phone call to the bank or a break in the lease.
What the restaurant numbers tell us
The Australian Bureau of Statistics recorded a 0.5 per cent rise in spending at hotels, cafés and restaurants in September. Over the September quarter, however, spending in that category slipped 0.1 per cent once price changes were taken out. Overall household spending volumes rose 0.7 per cent over the same quarter.
The hospitality figures cover accommodation as well as eating out, so they give a broad reading of demand. For a restaurant owner, the figures worth watching are covers, what each table orders and how often regulars come back. A higher menu price can lift the dollar value of a sitting even as fewer people come through the door.
The pressure on household budgets is clearer. Living costs rose between 3.8 and 5.1 per cent over the year to September, depending on the household type. Transport, housing, and insurance and financial services were among the main contributors in the September quarter. Those bills get paid first. What’s left determines whether a dinner out stays in the budget.
This is the slowdown the RBA wanted
The Reserve Bank lifted the cash rate to 4.85 per cent at its November meeting. It says spending has already slowed and expects this year’s rate increases to slow it further. The aim is to ease demand so businesses face less pressure to raise prices and inflation comes back down.
That sounds orderly at the national level. At the local level, the process runs through the choices people can make quickly. A borrower facing a higher monthly repayment might put off buying furniture or drop a weekend away. The restaurant feels it when the same customer starts treating dinner out as a birthday expense.
Higher rates can take spending power out of the economy while costs are still rising. A restaurant can face dearer supplies and fewer bookings in the same week. It can try to lift prices, absorb the cost or trim opening hours. Each option has a price of its own.
The big end of town has more room to move
The same rise in the cost of living has very different consequences depending on what is left after the bills. The RBA’s October Financial Stability Review found that cost pressures had increased particularly for lower-income households. Essentials take up more of their income, and households with mortgages face a further squeeze when repayments rise.
A household with a paid-off home and substantial savings has more freedom to keep its Saturday reservation. A household with a large mortgage, or a renter already committing much of their pay to housing, has less room. That helps explain how a premium dining room can be full on a Saturday while a suburban restaurant struggles to fill Thursday.
The same difference matters in business. A large hospitality group with several venues, cash reserves or better buying terms has more ways to absorb a quiet month. An independent operator with one lease and one dining room has fewer. A table that sits empty tonight earns nothing tomorrow, and the rent still falls due.
The squeeze can then reach the people working the floor. If bookings stay light, an owner can shorten the roster. For a casual worker, that means a smaller pay packet and less to spend elsewhere.
The Times View
A busy Saturday night can keep a restaurant going. The more telling question is how often regulars come back and whether there’s enough trade through the week to keep the kitchen open and the staff rostered.
The RBA is looking for enough restraint to bring inflation down. The test over the coming months is whether that happens while households still have enough left for an ordinary night out and the businesses that rely on them can keep offering one.
