Household spending in Australia experienced a 0.4 per cent decline in December, according to recent data released by the Australian Bureau of Statistics. This downturn follows substantial increases of 1 per cent in November and 1.4 per cent in October, indicative of changing consumer behaviour influenced by significant sales events.
Specific sectors saw notable changes. Clothing and footwear recorded the most significant decrease, with spending falling by 2.4 per cent. Furnishings and household equipment also saw a decline, decreasing by 1.7 per cent. Additionally, spending on health services decreased by 1.3 per cent, attributed to increased bulk-billing rates, which lowered out-of-pocket expenses for households.
Despite the December dip, overall annual growth was primarily driven by spending on services, which rose by 6.6 per cent. Spending on goods also increased by 3.7 per cent, although this partly reflected higher prices. EY chief economist Cherelle Murphy noted that household spending volumes, excluding price impacts, have risen for six consecutive quarters, marking a 2.4 per cent increase over the year – the highest since June 2023.
Murphy added that the Reserve Bank’s recent decision to raise the cash rate to 3.85 per cent will likely impact mortgaged households. However, factors such as a strong labour market, increased average earnings growth, rising house prices, and the deflationary effect of the appreciating Australian dollar on import prices are expected to support household consumption. The Reserve Bank is expected to further increase rates this year to combat rising inflation.
