Consumer spending edges up despite interest rate pressure

Australian household spending increased 0.8 per cent in October, but economists say significant growth won’t return until interest rates begin falling.

The CommBank Household Spending Insights Index reached 152.5, representing a 4.9 per cent rise from October 2023.

Ten out of twelve spending categories recorded increases, led by household goods at 2.5 per cent and recreation at 1.6 per cent.

CBA chief economist Stephen Halmarick said recent tax cuts and lower fuel costs had provided some relief.

“Spending rose marginally in October as income tax cuts, lower petrol prices and energy rebates freed some consumers up to spend on discretionary items,” he said.

Major events boosted recreation spending, with ticket sales surging 27 per cent during the month.

The data showed homeowners increased spending more than renters, with outright owners up 4.4 per cent annually compared to renters at 1.8 per cent.

Only education and utilities recorded declines, falling 1.3 per cent and 3.4 per cent respectively.

Halmarick predicted consumer spending would remain subdued until interest rates begin falling.

“We don’t anticipate seeing a substantial increase in consumer spending until the RBA commences an interest rate easing cycle, which we now expect in February 2025,” he said.

The uptick in discretionary spending partially offset September’s decline, with October’s boost largely driven by one-off events.