Spending on the Fifa Women’s World Cup and a jump in education, insurance and petrol outlays nudged national spending higher last month, according to CommBank data capturing the spending of about 7m households.
The household spending insights index picked up 0.7% to 137 in August. Compared with a year earlier, the index was up 2.3%, improving from the 1.9% annual rise in July.
A surge in international students lifted spending on education by 2.8% last month alone, accelerating the annual pace to 14.7% from 9% in July.
Insurance spending picked up 1.2% in August to be 13.5% higher than a year earlier as the cost of higher premiums flowed on to households. Petrol prices have reversed recent falls, causing motorists to spend 9% more for fuel last month, said CBA’s chief economist, Stephen Halmarick.
Spending on recreation jumped 1.9% in August and 8.4% from a year earlier, thanks in part to a 70% increase in transactions with ticketing agencies. “We think this is clearly related to the Fifa Women’s World Cup,” he said.
With population expanding at an annual clip of more than 2% in the past year and consumer inflation running at about 5%, spending on a per capita basis is shrinking in real terms. Still, “the last three months have shown more resilience than the prior three-month period”, CommBank’s report said.
The increase in nominal spending also contrasted with recent surveys that showed consumer confidence was languishing at depressed levels. The Westpac-Melbourne Institute index of consumer sentiment for August slipped 1.5% to 79.7, extending sustained pessimism not seen since the recession of the early 1990s.
Halmarick said the rise in actual outlays was not necessarily at odds with how people felt, since “people are spending more money on things they may not like spending a lot more money on, [such as] insurance, health, even maybe education”.
The national data masked diverging spending patterns for different categories, location and age group. Outlays on household goods, for instance, fell 3.6% from a year ago, while spending on household services was down 8.4% for the period.
Western Australia and South Australia posted the fastest annual increase in spending, at 4.7% and 4.5% respectively. Victoria’s spending was flat compared with a year earlier and only 1% higher in New South Wales and 2.8% in Queensland.
Households in Victoria and NSW were “more leveraged” in the housing market than other states, and so were more exposed to the 400 basis-point run-up in interest rates since May 2022, Halmarick said. Rents have also been increasing at a faster rate in those states.
The mortgage load on households were also reflected in the demographics of spending. Those aged 55 and above – who were more likely to own their own homes – were showing the fastest increase in spending picked up by CommBank. Younger groups were either not increasing outlays or were cutting back, he said.
The CBA is sticking with its expectation that the Reserve Bank’s cash rate has peaked at 4.1%, with the next move to be a rate cut as soon as next March.
“Monetary policy is now restrictive and financial conditions will continue to tighten in the months ahead on the lagged effect of RBA interest rate hikes and the fixed-rate mortgage refinancing task,” Halmarick said. “We continue to expect household spending to weaken further over the remainder of 2023 and into 2024.”
