By Matthew Henry

SYDNEY: Australian consumers are giving in to the allure of new ‘must-have’ consumer electronics gadgets like digital cameras and iPods, with a new report revealing the average Australian spends more of their weekly income on digital goods and mobile communications than on essentials like clothing, education and commuting.

The report published by Commsec claims the typical Australian consumer spends around $12 per week on products like mp3 players, computers, LCD TVs and digital cameras and $26 a week when mobile phone expenditure is added in, which is more than the average weekly spend on beer and wine, gas and electricity bills, doctor and dentist visits and essentials like clothing.

Commsec chief equities economist, Craig James, said rapid price erosion and the availability of ever-improving digital products has led to a doubling of consumer expenditure on digital goods in just over three years.

“A raft of products such as computers, mobile phones and televisions are constantly improving in speed and quality, while at the same time prices are falling, and we are buying more,” said James in the report.

The proportion of household spending on technology products is likely to continue its increase in coming years, which will benefit electrical retailers as consumers divert spending away from other discretionary purchases.

“To some extent what we are seeing is product displacement,” James told in an interview today.

“We all want to have these products but we will have to cut back in other areas, so we are going out to the cinema less, buying fewer books and magazines – even spending on cafes and restaurants has not been rising to the same extent. It is also the case that these technology goods are getting better, brighter and faster with every generation and the upgrade cycle is accelerating.”

However, James has warned retailers that while sales through the electrical retail channel will rise, prices will continue to fall and only those who can manage costs will survive the margins squeeze.

“The challenge for retailers in this area is to come to grips with deflation and keep their costs down,” he said.