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New data has shown an easing in spending during September, suggesting that the government’s stage three tax cuts have not encouraged consumers to open their wallets.
The latest Household Spending Insights (HSI) Index data released by the Commonwealth Bank of Australia (CBA) has shown a dip in spending among mortgage holders in the year to September 2024, falling to 1.2 per cent from 2.8 per cent the previous month.
The past year saw home owners with a mortgage reduce spending on transport due to lower petrol prices (down 7 per cent on the year prior), household services (down 5 per cent), hospitality (9 per cent), food and beverage goods (18 per cent), and motor vehicles (4 per cent).
The largest contributors to mortgage holder spending were insurance, which increased 9 per cent year on year, recreation (13 per cent), health (5 per cent), and household goods (15 per cent).
Meanwhile, the annual rate of spending for renters fell to -1.1 per cent in September after a 1.3 per cent reading in August. The report attributed this fall to reduced spending on transport (9 per cent), household services (4 per cent), and hospitality (13 per cent).
The HSI data further revealed that spending from home owners without a mortgage increased to 2.3 per cent year on year, up from the 1.8 per cent recorded in August, with increased spending on insurance (11 per cent), health (6 per cent), and recreation (14 per cent).
Commenting on the data, CBA chief economist Stephen Halmarick said the HSI data suggested that the stage three tax cuts introduced at the beginning of the new financial year “had not led to a material rise in consumer spending”.
“The spending slowdown in September was expected after an early Father’s Day led to consumers splashing out on household goods and hospitality for dad,” Halmarick said.
“Although we saw a rise in recreation spending associated with the AFL and NRL Grand Finals, consumer spending overall remains subdued, now growing at just over 2 per cent for the year.”
Halmarick said that the only other spending categories to show increases during September were all essentials, which has indicated that “increased take-home pay from tax cuts is largely being used to pay down debt and on staples, not spending on discretionary items”.
“This trend is reflected in the year to September, supporting our view that softer economic data, coupled with a further deceleration in inflation will see the RBA cut interest rates in December 2024,” he said.
Overall, the HSI Index declined 0.7 per cent to 146.7, with a “significant slowdown” in the pace of spending in the year to 2.1 per cent, down from 3.7 per cent in August.
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