Interest rates, inflation: ABS household spending indicator flat, sign Aussies banking tax cuts
Written by admin on October 4, 2024
Cash-strapped Australians are stashing away the extra income from the Stage Three tax cuts, new data on household spending has revealed.
Over the next few months, economists will be closely watching whether households will be spending the extra income, which could stifle efforts to curtail inflation and dissuade the Reserve Bank from cutting the cash rate.
Figures released by the Australian Bureau of Statistics (ABS) on Friday found household spending remained unchanged month-on-month in August, after falling 0.5 per cent in July, and 0.1 per cent in June.
Year-on-year, the indicator had increased by 1.7 per cent.
The ABS’ head of business statistics Robert Ewing said spending in services increased by 0.4 per cent, which was led by air travel, hotel accommodation and dining out, while goods spending fell by 0.3 per cent due.
“Growth in household spending has stalled at the start of the financial year, even as the federal government’s Stage 3 tax cuts came into effect on July 1,” he said.
Friday’s figures appeared to overshadow August retail trade figures, which reported a 0.7 per cent increase in spending, largely boosted by an early Father’s Day on September 1 and early-onset of warmer weather.
Mr Ewing said the early spring prompted consumers to bring forward their spending on things like “summer clothing, liquor, outdoor dining, hardware, gardening items, camping goods and outdoor equipment”.
However, Betashares’ chief economist David Bassanese said that while the early data didn’t paint a complete picture, it was evidence households were banking the tax cuts.
“Given the partial and volatile nature of this data, and that we’re only two months into the new quarter, it’s too early to make a strong call but the early evidence suggests that consumer spending remains fairly subdued and households are more likely saving than spending the tax cuts,” he said.
However Mr Bassanese said it was still too early to make a call.
“I don’t think the Reserve Bank will be taking to much of a signal from either the retail sales or the household spending indicator.”
