Waste not, want not

A Study by Clive Hamilton and Richard Denniss

Australia Institute Tel: (02) 6125 1270Email: exec@tai.org.au

In 2002 a survey by the Australia Institute found that 62 per cent of Australians did not believe that they could afford to buy everything they really needed. The Institute’s latest report, Wasteful Consumption in Australia, estimates that Australians spend more than $10.5 billion each year on goods and services from which they derive no benefit. Clive Hamilton and Richard Denniss outline the new study.

The marketing industry has been aware for some time that shopping is no longer simply something we do to acquire the things we need. Shopping nowadays is as much a recreational activity as a functional one, and is often undertaken as a form of mood-enhancement, captured in the term ‘retail therapy’. In the words of one marketing analyst

"We are beyond satisfying basic demands and we have moved to a tertiary level where consumption becomes leisure. Even the stores that appear to be for basic needs are really about leisure".

Shopping can even be patriotic. That function was highlighted in the aftermath of the September 11, 2001 attacks on the New York World Trade Centre when US Treasury Secretary Paul O’Neil declared:

"Each and every American should know that by continuing to work and spend, they are doing their part to restore our nation and our economy in the wake of last week’s attack".

For several years now we have been told that booming retail sales have been propelling the Australian economy. Just how we were to sustain growth through borrowing money to purchase imported electrical appliances remained unsaid, but any criticism of the growth in employment associated with increased retail activity was seen as churlish.

If much of the benefit we gain from shopping lies in the act of purchasing then the usefulness of the goods purchased becomes a secondary consideration. This suggests that much of what we buy may not be used at all, or used very little. Spending of this sort we have called ‘wasteful consumption’. It refers to the amount of money we spend on shoes we don’t wear, food we don’t eat, CDs we never listen to and exercise bikes that gather dust in the shed.

The Institute commissioned Roy Morgan Research to conduct a survey of 1644 people from across Australia. The questionnaire asked about a range of consumer behaviours and attitudes. We found that virtually all Australians admit to wasting money on some goods or services that are never or rarely used, with a significant proportion admitting to substantial amounts of waste. Overall, the amount spent on wasteful consumption during 2004 amounted to over $10.5 billion, or $1226 per household. That is, the average household wastes the equivalent of a whole month’s mortgage payments each year on things that they do not use. This is likely to be a substantial underestimate of the extent of wasteful consumption as several major items, such as houses that have unused rooms and second cars that are rarely used, were not included in the survey.

The breakdown of major areas of wasteful consumption is shown in Figure 1. The type of wasteful consumption that accounts for the largest amount of spending is food. Overall Australians threw away $2.9 billion of fresh food, $630 million of uneaten take-away food, $876 million of leftovers, $596 million of unfinished drinks and $241 million of frozen food, a total of $5.3 billion on all forms of food in 2004.

This represents more than 13 times the $386 million donated by Australian households to overseas aid agencies in 2003. The next largest items on which money was wasted was interest paid on credit cards with an interest-free period ($1.59 billion) and clothes, shoes and accessories that were purchased but not worn ($1.56 billion).

Wasteful consumption occurs in all household types; however, wealthier households and younger people are more prone to it. The relationship between the amount of money wasted on clothes and food as income increases is shown in Figure 2. Those living in households earning more than $100,000 per year are the most likely to buy food and clothing that they do not use.

The fact that the young and the wealthy are the most likely to consume wastefully should be of concern to those worried about the environmental impacts of growing consumption expenditure. While it is possible that young people grow out of their wastefulness, it is also possible that values of thrift and the importance of spending carefully have not been passed on effectively to younger Australians. As this cohort ages, and as incomes continue to rise, it is likely that the amount of wasteful consumption will rise more rapidly than the rate of economic growth.

Australia is currently grappling with a number of important but seemingly unrelated problems. Long work hours are placing stresses on families’ ability to spend time together. Rising consumption expenditure has seen Australians taking on record levels of personal debt. And finally, Australia’s demand for energy and other scarce resources is continuing to grow rapidly.

Wasteful consumption expenditure is at the heart of all these issues. If Australians reduced the amount of money they spent on things that they did not really need then they would be able to work less, borrow less, and place less pressure on the natural environment.

Unfortunately, wasteful consumption is also at the heart of the pursuit of economic growth. For those who believe our national objective should be growth before all else it is irrelevant whether the goods and services purchased by Australians are actually necessary or used. On the contrary, if the things we buy are not actually used then we do not have to wait until they have been worn out before a ‘replacement’ can be purchased. This, of course, is good for growth because removing the link between purchasing something and actually using it makes the task of selling more and more things each year easier. Reducing wasteful consumption should be one of the most painless ways to reduce the use of scarce natural resources. By wasting less individuals can consume less. This would permit them to work less or borrow less. But reducing wasteful consumption is likely to be one of them most difficult social challenges. A focus on the need to reduce wasteful consumption suggests that the solution to waste disposal is to build fewer shopping centres rather than more land fill sites.