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Consumers cut spending but find cash for travel and entertainment

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Australian consumers are reshaping their spending habits, with a notable shift towards prioritizing travel and entertainment despite the burden of increasing living costs.

This trend emerges from the most recent CommBank iQ Cost of Living Insights Report, which offers a detailed examination of Australian spending patterns in the current economic climate.

The report reveals a complex financial landscape where the expenditure on essential goods and services has indeed escalated, albeit at a pace that trails behind the current rate of inflation.

Significantly, while overall discretionary spending remains largely unchanged, the nature of this spending is undergoing a notable transformation.

One of the key findings of the report is the increased financial commitment of Australians towards essential needs, including insurance, medical expenses, and pharmacy costs.

This heightened focus on essentials naturally reduces the available budget for discretionary spending in areas such as household goods and clothing.

However, a remarkable exception to this trend is observed in the domains of travel and entertainment.

These sectors stand out, recording a robust growth that surpasses inflation rates, marking an 8.2 per cent increase in travel spending and an 8.6 per cent uptick in entertainment expenditure.

This is in stark contrast to an 8.1 per cent decline in spending on household goods.

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Money

Australian Treasurer and RBA chief clash over economy

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A rare dispute has emerged between Australia’s Treasurer Jim Chalmers and Reserve Bank Governor Michele Bullock over the nation’s economic trajectory.

Governor Bullock argues the economy remains overheated, even as growth data shows recent slowdowns.

Treasurer Chalmers, however, warns that sustained high interest rates are “smashing the economy.”

This debate is critical for Australians, as it will influence the future of interest rates and inflation.

Data shows a mixed economic picture: while inflation is down, it’s still above target, and the jobs market remains historically strong.

Ultimately, deciding who’s right may come down to theory and perspective on economic health.

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Central bank expected to ease interest rates as election nears

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The Federal Reserve is expected to cut interest rates again this week, a move aimed at cooling inflation.

This quarter-point rate cut would bring the benchmark rate to about 4.6%, the second reduction this year.

Analysts expect that additional cuts could come in December, which would benefit borrowers by reducing loan costs.

If Trump were to win the election, economists say his proposals on trade and immigration could reignite inflation.

The Fed is balancing a strong economy and low unemployment with its inflation-calibrated rate cuts.

As Election Day approaches, all eyes are on both the Fed and the presidential race.

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Big Tech pushes AI investments

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Tech giants like Microsoft and Meta are accelerating AI data center spending, with massive capital pouring into these projects.

Microsoft and Meta reported on Wednesday that AI investments are spiking their expenses, while Alphabet announced similar trends.

Amazon, due to report earnings shortly, is expected to mirror these projections, foreseeing further pressure on profit margins.

Wall Street is getting wary of the financial strain, as each company’s stock took a hit this week despite strong quarterly numbers.

Shares of Meta fell over 3%, and Microsoft saw a 6% drop, underscoring Wall Street’s jitters.

“It’s expensive to keep up with AI technology demands,” says GlobalData’s Beatriz Valle, emphasising a competitive race in AI capacity.

The high-stakes investments are starting to test investor patience in Big Tech’s ambitious AI journey.

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