Ozi Households Outsource Their ExpenditureBy Jonathan Shapiro As the nation’s brightest financial minds try to find way to foster growth, it helps to understand the way our dollars slush around in the economy. On closer inspection, it seems we’re spending a lot more money, and creating more jobs, in getting help, rather than buying stuff. In short, we’re unlocking the value of our scarcest resource – time. In turn, that’s propelling the rise of the services based “barista” economy. A peek into the rise of the services economy was offered by the Reserve Bank of Australia’s Christopher Kent in a speech on Wednesday in Hobart. One thing is clear: We are spending a lot more on “services” than we are on “stuff'”. The share of spending on services is up from 53 per cent to 65 per cent of household consumption. So what services are we spending more money on? This RBA table lays out just how our spending habits have changed over the last 30 years:
Household Consumption Expenditure Shares (%)
2. Goods can now be made cheaper in emerging economies. In the words of the RBA, “the world has become much better at producing goods”. To reflect these changes more jobs are being created in household services – from a quarter of all jobs 30 years ago to a third today. These are jobs in accommodation, food (more baristas), recreation, education, training and healthcare. “These are all things we want and need more of as our appetite for goods becomes more easily satisfied,” the RBA’s Dr Kent said. Colonial First State economist James White suggests the proliferation of small coffee shops, for time pressed, caffeine-dependent Australians, symbolises but doesn’t fully reflect the rising economic might of the services sector. “The thing about the barista economy is that coffee is a shared experience. However, it’s the one common touch point every Australian has to the services sector and its growth. Most of the growth in services is much less common, driven by more unique preferences and needs,” he says. White says that as services become more niche, it’s difficult to characterise it as a single industry. There are more niche services arising that focus on small markets, as specialisation becomes greater, but we don’t readily observe these industries, because they’re small, sometimes mobile and often hidden in homes and suburban centres. The rise in services spending comes down to valuing our most scarce resource – time. We can improve the quantity of time, we have or its quality. As a result of industrialisation, we all have as much as we need from a goods perspective to save us time and improve the quality of it. It’s cheap too. Consequently, we find employing someone else to provide a service is a much better way of adding more time or improving the time we have,” he says. White says our spending on services can be divided into three broad categories: 1. Tasks where our time is better spent elsewhere
2. Tasks where we don’t have the skills and
3. Tasks that improve our quality of time such as recreation.
“An important aspect of all this is that increasingly people might be able to monetise their leisure time; personal trainers might be an obvious example. But similarly, many of us have more intellectual jobs that we find interesting and varied. The services sector brings a merger between work and leisure; fewer people have jobs where the distinction of work and leisure is obvious,” Source: http://www.smh.com.au/business/the-economy/welcome-to-the-barista-economy-20150311-140pwr.html