Source : Perth Now news
Resilient households have continued to spend in July, even as interest rate hikes and rising fuel prices hit consumers budgets.
Australian Bureau of Statistics figures show household spending surged 1.1 per cent in July.
This is the third month in a row households have spent more following a surprise jump in June when spending rose 0.8 per cent and May when households spent 1.2 per cent more on items.
Spending is now up 7 per cent, in nominal terms, across the past 12 months.
Oxford Economics Australia economist Harry McAuley said Australian household spending would be a concern for the RBA as it tries to tame inflation and ponders more interest rate rises in order to achieve that result.
“(Thursday’s) strong spending growth and (Wednesday’s) stubborn underlying inflation print will do very little to improve the mood,” he said.
“The board will be hoping falling house prices and the threat of further rate hikes will take some of the wind out of households’ sails and mean they can avoid another hike later this year.”
The RBA has previously flagged the need for spending to slow.
Speaking to the Queensland Futures Institute Annual Regions Summit in Brisbane, RBA deputy governor Andrew Hauser explained the central bank’s thinking.
“Monetary policy needs to bring inflation down, that is why we have raised rates three times this year, but here is the bad bit, it can only do so by reducing pressure on capacity and demand on the economy,” he said.
“That means slightly slower growth in consumption, slightly slower growth in employment.
“We’ve seen a little bit of that so far, but we are going to need to see more to get inflation back.
“That is not a slump, that is not a depression … but is slower than growth in the past.”
Indeed APAC economist Callam Pickering said spending was at its fastest pace in three years.
“Cost-of-living pressures may weigh heavily on many households, but you wouldn’t know it looking at the data,” he said.
“While the household sector faces some headwinds, evidently they haven’t impacted the overall economy a great deal. Yes, some households are struggling – particularly lower income ones – but that’s been more than offset by a spending splurge elsewhere.
“Even a series of interest rate hikes hasn’t been enough to slow momentum.”
The nominal spending figure is not adjusted for the impacts of inflation, which was 3.5 per cent over the same time period.
Prior to Thursday’s figures, markets expected spending to remain up a further 0.3 per cent and annual growth at 5.7 per cent.
Spending was expected to slow due to household income growth easing and household wealth declining because of the weak housing market.
