Household spending on services increased by 0.4 percent in August, with a notable rise in air travel, hotel accommodation, and dining out.
Despite a decrease in headline inflation and tax cuts, Australian household expenditure has not experienced a significant uptick.
According to data from the Australian Bureau of Statistics (ABS) released on Oct. 4, household spending remained stagnant in August. This follows consecutive declines of 0.5 percent in July and 0.1 percent in June.
ABS’s head of business statistics, Robert Ewing, commented, âHousehold spending growth has halted at the beginning of the financial year, despite the implementation of the federal governmentâs Stage 3 tax cuts on July 1.â
Recent GDP figures also indicated a decline in household consumption.
Opposition Treasurer Jim Chalmers highlighted a 0.2 percent decrease in household consumption as the key takeaway from the national accounts, attributing it to people cutting back on discretionary items due to inflationary pressures.
With the lowest annual household savings ratio in 17 years, Chalmers acknowledged that households are facing significant pressure.
Related Stories
The data also indicated a 0.4 percent increase in spending on services in August, driven by higher expenses on air travel, hotel accommodation, and dining out. However, this growth was counterbalanced by a 0.3 percent decline in goods spending, with households cutting back on purchases of new vehicles and automotive fuel.
Comparing to the same period last year, most states and territories saw an increase in household spending, with Western Australia leading at 3.9 percent growth. Queensland and the Northern Territory followed with 2.7 percent and 1.9 percent growth, respectively.
Victoria and Tasmania, on the other hand, experienced a 0.3 percent decrease in spending.
IMF Urges Spending Control
Just a day before the ABS report, the International Monetary Fund (IMF) advised the Australian government to control spending in order to lower inflation rates.
While acknowledging that temporary cost-of-living support can reduce prices, the IMF cautioned that such measures might stimulate broader economic activity, potentially undermining inflation control.
In its annual report on Australiaâs economy, the IMF highlighted that recent tax cuts could increase household disposable income but warned of uncertain broader impacts.
The IMF predicted a gradual economic recovery, with growth expected to reach 1.2 percent in 2024 and 2.1 percent in 2025, driven by real wage growth and strong public demand.
These forecasts are slightly more optimistic than those of the RBA, which suggest that inflation control will only be achieved by mid-2025, with Australia overcoming inflation by 2026.
