Consumers are still willing to spend on travel but some are cutting back on insurance as cost-of-living pressures mount.
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Household spending rose in June, the latest Commonwealth Bank data revealed, thanks to a surge in recreation transactions.
The bank's Household Spending Insights index rose by 0.6 per cent in the month of June, after a 0.7 per cent increase in May.
Spending on recreation, including travel, led the monthly increase with spending up 3.2 per cent in the category.
Hospitality spending was up 2.1 per cent in June, followed by a 0.9 per cent rise in food and beverage goods.
To determine the index, Commonwealth Bank uses de-identified payments from about 7 million banking customers, which it says represents about 30 per cent of Australian household transactions.
Spending on travel insurance down
In the year to June, Commbank's household spending index increased 3.9 per cent, a slight moderation from the 4 per cent rise in the year to May.
Insurance was by far the greatest contributor to the rise, with spending in the category up 8.8 per cent over the year.
It was the fastest-growing category, led by large increases in spending on home, motor, health and pet insurance.
But spending on life and travel insurance was down in the year to June, in what Commonwealth Bank suspects is a reflection of cost-of-living pressures.
Nam Nguyen, owner of Dickson-based H&N Company which specialises in travel and visas to Vietnam, said travel insurance costs were much higher this year.
Some of his customers were opting for credit cards that include travel insurance as a way to save money.
Clients were also cutting back on business class flights, Mr Nguyen said.
"People just focus on where they can spend less money ... which airlines are cheaper," he said.
Travellers who are injured or become unwell overseas without adequate travel insurance have been known to turn to crowd-funding platforms such as GoFundMe to pay for their bills.
It is a scenario travel agent Lisa Calabria has heard multiple stories of recently, but said it was unlikely to happen to those who book through a travel agent.
"When somebody comes to see an agent like us, we will always make sure that they have adequate travel insurance whether they take it out with us or they've got it through their health fund or they have it through even their credit card," she said.
"People booking online might decide not to take out insurance because they haven't had a conversation with someone who's going to tell them what that means."
Consumers spend big on travel
While spending on recreation grew in June, it was in the context of a soft annual increase of just 0.2 per cent, the CommBank data showed.
Online travel bookings, airlines and fitness clubs led the growth in the category, however it was offset by reduced spending on accommodation, ticketing services and cruise lines.
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For some in the ACT, which saw the strongest growth in spending in June, cost-of-living pressures hadn't dampened their travel plans.
Ms Calabria said her business Capital Travel Manuka had been "extremely busy" since travel restrictions were lifted post-COVID.
Destinations such as Europe, Japan and Vietnam were popular, she said.
As well as budgeting for travel insurance, many of Ms Calabria's customers were happy to spend more on airfares.
"Even younger people are going 'no, I'll go premium economy'," she said.