Get all your news in one place.
100’s of premium titles.
One app.
Start reading
AAP
AAP
Business
Poppy Johnston

Consumers brush off rate rises again

Data shows people are still spending strongly but analysts warn purse strings may be tightened soon (Luis Ascui/AAP PHOTOS) (AAP)

Consumers are still shopping despite aggressive interest rate hikes, with retail trade turnover lifting 0.6 per cent in August.

Despite cost of living pressures and 175 basis points of cash rate hikes driving up mortgage repayments, spending on nice-to-haves remains strong.

Discretionary spending was strongest in department stores - up 2.8 per cent - and household goods retailing was up 2.6 per cent.

Food-related spending also lifted, according to Australian Bureau of Statistics data, with eating out at cafes and restaurants - plus takeaways - up 1.3 per cent.

However, spending was down in other discretionary categories, such as clothing, footwear and personal accessories.

CreditorWatch economist Anneke Thompson said this could be a sign consumers were starting to tighten their purse strings.

Despite the mixed result across discretionary categories, overall spending remained 16 per cent above the pre-COVID trend and a massive 19 per cent above the downcast pandemic spending this time last year.

The retail sales boost was slightly higher than analysts expected, and followed a 1.3 per cent month-on-month jump in July and a more modest 0.4 per cent lift in June.

AMP economist Shane Oliver said people were likely able to keep spending because they had built up comfortable savings buffers.

He also said the wealth effect from elevated home prices was likely feeding into spending habits, as was the strength of the jobs market.

Dr Oliver said retail sales had stayed strong for longer than expected but also said it took time for rate hikes to flow through.

"We continue to expect a slowdown ahead as rate hikes are fully reflected in mortgage payments, rates continue to rise, negative wealth effects from now falling home prices start to impact, consumer confidence remains depressed and the rundown in the saving rate runs its course," he said.

Ms Thompson said the Reserve Bank of Australia would be watching spending during the upcoming summer holiday and festive season closely.

"If consumer behaviour does start to better reflect very negative consumer sentiment, then business sentiment is likely to start falling as well," she said.

The end of the fuel excise tax cut - expected to add more than 20 cents to every litre of petrol - will also likely add to household budget pressure.

The fuel excise tax was halved for six months as a cost of living relief measure but will expire on Wednesday evening.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.