Australians more mindful with spending as belt tightening moves another notch
Consumers are focusing on key areas of spending as the weight of interest rate payments impact budgets
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Australian consumers are strapping themselves in for a bumpy ride, as they focus on key spending areas, new data reveals.
In signs that consumers are being more mindful with their money, the newly launched CommBank Household Spending Insights (HSI) Index shows that spending in July increased in areas such as household goods, transport, hospitality, education, insurance and communications.
This was offset by a decline in spending on more discretionary areas, such as recreation and food and beverage goods, as well as utilities, motor vehicles and household services.
The report showed that South Australia experienced the strongest growth of all Australian states in July, up 1.9 percent, followed by Victoria and NSW, both up 1.7 percent. However, over the past year, Western Australia came out on top, with spending increased by 3.5 percent, followed by the Northern Territory and South Australia, both at 3.4 percent. Over that same time period, spending fell in NSW, down -0.2 percent, with Victoria recording a fall of -0.3 percent.
CBA Chief Economist Stephen Halmarick said a dramatic hike in interest rates since May 2022 was clearly having a major impact on household budgets.
“The effects of 400bp of RBA interest rate increases is clearly reflected in a significant overall slowdown in household spending as measured by the CommBank HSI Index,” he said.
“Monetary policy is now restrictive and financial conditions will continue to tighten in the months ahead on the lagged effect of RBA interest rate increases and the fixed rate mortgage refinancing task. We continue to expect household spending to weaken further over the remainder of 2023 and 2024.
“While the RBA is likely to hold the cash rate at 4.1 percent for an extended period, we expect it will start lowering interest rates in March next year to 3.1 percent by the end of 2024 – in response to a slowing economy, inflation closer to target and a softer labour market.”
The CommBank Household Spending Insights Index has been compiled using payments data from about seven million CBA customers, equivalent to about 30 percent of all consumer transactions in Australia, to track latest trends across 12 categories in consumer spending. Mr Halmarick said the CBA payments data is now aligned to Australian Bureau of Statistics spending categories to be nationally representative and seasonally adjusted.
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Employment grew for the 16th consecutive month as companies expanded.
2 min
According to a recent PMI report, Qatar experienced its fastest non-energy sector growth in almost two years in June, driven by surges in both existing and new business activities.
The Purchasing Managers’ Index (PMI) headline figure for Qatar reached 55.9 in June, up from 53.6 in May, with anything above 50.0 indicating growth in business activity. Employment also grew for the 16th month in a row, and the country’s 12-month outlook remained robust.
The inflationary pressures were muted, with input prices rising only slightly since May, while prices charged for goods and services fell, according to the Qatar Financial Centre (QFC) report.
This headline figure marked the strongest improvement in business conditions in the non-energy private sector since July 2022 and was above the long-term trend.
The report noted that new incoming work expanded at the fastest rate in 13 months, with significant growth in manufacturing and construction and sharp growth in other sectors. Despite the rising demand for goods and services, companies managed to further reduce the volume of outstanding work in June.
Companies attributed positive forecasts to new branch openings, acquiring new customers, and marketing campaigns. Prices for goods and services fell for the sixth time in the past eight months as firms offered discounts to boost competitiveness and attract new customers.
Qatari financial services companies also recorded further strengthening in growth, with the Financial Services Business Activity and New Business Indexes reaching 13- and nine-month highs of 61.1 and 59.2, respectively. These levels were above the long-term trend since 2017.
Yousuf Mohamed Al-Jaida, QFC CEO, said the June PMI index was higher than in all pre-pandemic months except for October 2017, which was 56.3. “Growth has now accelerated five times in the first half of 2024 as the non-energy economy has rebounded from a moderation in the second half of 2023,” he said.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
