Last week's contribution focussed on the household budgetary survey published by the National Office of Statistics. The aspect on the way the Maltese spend their money was not given much attention as aspects like ownership of household goods or the sources of income of the Maltese household were given more space.
This week's contribution will seek to tackle this specific issue as there is in fact a great deal to be said about the way we spend our money. Maybe the expenditure pattern of the Maltese is considered more as a sociological issue than an economic one as it is a question of tastes, perceptions, attitudes and expectations. However the impact of all this is always an economic one.
One data that immediately catches a person's attention is that total household expenditure was estimated to be over Lm980 million, thus meaning that average expenditure per person on an annual basis is around Lm2,500. This expenditure excludes loan repayments on homes, which impact on 15.6 per cent of households.
Total disposable income was estimated to be just under Lm1,050 million, thus indicating that the Maltese save around six to seven per cent of their disposable income. The fact that net salary and social benefits together amount to just over Lm800 million means that the Maltese need to resort to other sources of income to finance their expenditure, giving substance to the claim that we are spending beyond our means.
Looking at specific items of expenditure, one notes some shocking (I know I am being subjective here) data. For example the amount we spend on tobacco or package tours and holidays is more than the amount we spend on medicines and pharmaceutical products and more than the amount we spend on education.
Could it be that we over-taxing ourselves to support our health service and our educational system, to then spend the money on something that we know damages our health or something that is still considered a luxury? Should there be fiscal measures that seek to influence our spending habits?
Another assessment that can be made is the division between personal expenditure and expenditure on goods and services that are consumed by all the members of the household such as water and electricity or furniture. I am purposely removing from this list food, beverages and tobacco, which together take up 23.9 per cent of our average expenditure.
Of the remaining 76.1 per cent, just under half is spent on personal, individual items and the other half is spent on items of common or joint consumption.
An analysis was made by the NSO of expenditure in relation to the number of dependent children in the household. Households having no dependent children account for around 45 per cent of total household expenditure. Households having three or more dependent children tend to spend more in relative terms on items of food, beverages and tobacco, clothing and footwear, recreation and culture and education but less on other items.
There is a similar spending pattern among those living in the southern part of the island, when compared to those living in the northern and western part of the island.
The key variable impacting on spending habits is income. Lower income earners tend to spend a higher proportion of their income on food, beverages and tobacco. Middle income earners tend to spend a higher proportion of their income on clothing and footwear than both the lower income earners and the higher income earners.
The percentage of income spent on education, transport and communication and recreation and culture increases as income increases, while that on health decreases as income rises.
One final staggering data is that we spend around Lm32 million annually on hairdressing and personal grooming services. That makes it an average of around Lm80 per person annually.
It is a very strong indication of the changing spending habits of the Maltese population that are becoming increasingly similar to those of economies that have a gross domestic product per capita far higher than ours.
Probably our consumer behaviour does not reflect the level of income that we manage to generate. Alternatively we may be generating income which is not finding itself into any of the official data and which is going directly into consumption.