Will RBA cash rate increases rein-in household spending?
ABS data shows spending continues upward, with the categories of furnishings and household equipment, hotels, cafes and restaurants and transport reporting the largest increases.
The ABS Monthly Household Spending Index revealed household spending increased 7.6% in April, compared to the same period last year.
Andrew Tomadini, Head of Macroeconomic statistics at the ABS, said with easing COVID-19 restrictions, household spending increased in eight of the nine spending categories in April 2022 compared to April 2021.
"Spending in recreation, hospitality and retail continued to rise. Spending on health was the only category to decrease in April 2022, down 1.4%," Mr Tomadini said.
ABS notes all states and territories recorded increases in household spending compared to April 2021, however Queensland, South Australia and Western Australia, led the charge with increases of 11.4%, 9.5% and 8.1% respectively.
ABS Household Spending Index results published in July will detail how the effects of the first cash-rate increase since November 2010 have impacted spending behaviours.
CommBank's Household Spending Intentions (HSI) Index reported a 2.9% uptick in May, driven by spending increases across the categories of home buying, health and fitness, and transport.
Bank economists note the home buying category rose 14.8% month-on-month from April, while health and fitness rose 12.8% and transport lifted 11.7% with results likely due to a string of April public holidays.
CBA Senior Economist Belinda Allen said given month to month seasonal volatility, annual movement in spending is best reflective of the state of the Australian economy.
"On an annual basis the HSI Index is up by 7.9%, however with consumer prices rising above 5% much of this lift is being driven by higher prices rather than stronger volumes," Ms Allen said.
"Going forward it will be important to watch the HSI categories, including home buying, motor vehicles, retail and entertainment to judge the impact of interest rate rises."
Stronger prices are being felt everywhere from supermarket shelves to the petrol pump, yet recent NAB research revealed Aussies are showing a willingness to alter spending behaviours, cutting back on non-essentials including retail and entertainment in order to meet cost of living pressures.
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Harry O'Sullivan
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