More signs that Australian consumers are locking down in the bunker. While official retail sales have been weak for a couple of months as higher loan repayments take cash out of pockets, a new Commonwealth Bank report shows consumers continued to tighten their belts in July, with spending growth declining nationally to just 1.3 per cent in the year to July, weakest in Victoria.
The monthly CommBank Household Spending Insights (HSI) analyses payments data from approximately 7 million CBA customers, which accounts for roughly 30 per cent of all Australian consumer transactions.
Spending gains in July in Household goods, Transport, Hospitality, Education, Insurance, Health and Communications & Digital were offset by declines in Household Services, Recreation, Utilities, Motor Vehicles and Food & Beverage Goods spending.
The strongest State for household spending growth in July was South Australia (+1.9 per cent), followed by Victoria and NSW (both +1.7 per cent), while Northern Territory (+0.1 per cent) and Queensland were flat. However, over the past 12 months Western Australia (+3.5 per cent), South Australia and Northern Territory (both +3.4 per cent) saw the strongest household spending growth, and NSW (-0.2 per cent) and Victoria (-0.3 per cent) the weakest.
CBA economists Stephen Halmarick and Belinda Allen, who prepared the report, noted that due to the lagged effect of interest rate hikes, they expected financial conditions to continue to tighten in into 2024. “Our view is that the monetary policy tightening cycle is now at an end — although near-term risk is for a further tightening, albeit the hurdle is high.”
Wage rises are starting to slow
I noticed Treasurer Jim Chalmers claiming the latest wage data showed the Government was delivering on its promise to give everyone a pay rise to help fight inflation. He didn’t mention those pay rises were feeding inflation and consequently were one of the big reasons interest rates have had to be increased… And he obviously didn’t point out those wage rises were pulling people into higher tax brackets, so the Government’s budget was in surplus because of higher income tax revenue.
But the pay rises may be peaking. The Wage Price Index (WPI) grew at a slower-than-expected pace in the June quarter 2023. In fact, the 0.77 per cent quarterly pace was the slowest since March last year and below the 0.9 per cent rate expected by economists.
Including bonuses, annual wage growth dipped from 3.91 per cent in the March quarter to 3.74 per cent in the June quarter.
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