Fresh ABS data shows unexpected shift in Aussie spending habits

Australian households are showing signs they are moving past cost-of-living pressures, but this could have an impact on the Reserve Bank’s next cash-rate move.

Spending rose 0.1 per cent in August, fresh Australian Bureau of Statistics (ABS) figures show.

This follows a 0.4 per cent rise in July and 0.5 per cent lift in June.

Australians in August spent more booking airline travel and accommodation, helping to drive a 0.5 per cent increase in services-related expenses.

Spending on goods slipped 0.2 per cent over the same period.

Oxford Economics head of economic research and global trade Harry Murphy Cruise said a jump in household spending would reduce the likelihood of further interest-rate cuts.

“On Tuesday, the RBA flagged their concern that household spending was picking up faster than expected,” he said.

“If that continues, the extra spending could keep upward pressure on prices and slow the pace of rate cuts.”

Australia's Cash Rate 2022

Mr Murphy Cruise conceded the recent lift could be due to discounts offered by retailers and back-to-back public holidays rather than a “genuine revival in household appetite to spend.”

“With today’s data showing the smallest rise since April and continuing a four-month run of diminishing gains, the RBA will take some comfort that the former has played an important role. Still, spending remains 5 per cent higher than a year ago,” he said.

Mr Murphy Cruise said a combination of interest-rate relief thoughout the year, rising wages and low unemployment had led to the spending boom.

The small rise in August was the fourth increase in a row, and spending has risen in 10 of the last 12 months, ABS head of business statistics Lauren Binns said.

While the RBA held interest rates after its September meeting on Tuesday, it has cut rates three times in the last nine months. This included further interest-rate relief in August.

Deloitte Access Economics partner Stephen Smith said prior to Thursday’s data being released that interest-rate cuts had been pivotal to lifting household spending.

“A single 25 basis point interest-rate cut is worth nearly $1700 a year for the average new borrower,” he said.

“We expect real household spending growth to improve from the 1.0 per cent recorded in the 2024-25 financial year to around 2.5 per cent in both 2025-26 and 2026-27, comfortably faster than broader economic growth in those two years.”