Trying to get a handle on what is going on in the economy is not easy, as I discussed recently in my show about retail turnover, which when adjusted for inflation is falling, and falling hard.
So no great surprise to see that the latest data from the ABS on Household spending growth showed it has slowed, up 0.1% over the year. The 0.1 per cent rise in May follows a 2.2 per cent increase in the 12 months to April.
Through the year household spending increased for four spending categories. The largest increases were in: health (+8.8%), miscellaneous goods and services (+7.3%) and furnishing and household equipment (+3.3%).
Through the year, household spending on: services rose 2.3%, driven by increased spending on health and other services. goods fell 2.5%, driven by decreased spending on clothing and footwear and goods for recreation and culture.
Once again, there was higher growth in spending on non-discretionary goods and services, – things people have to buy such as on health services and food, compared to discretionary items – things which are not necessary, rather more aspirational spending. Typically when people are under financial pressure, it shows first in a fall in non-discretionary items.
But this is not inflation adjusted, at 4% currently and if you adjust for inflation, in fact both are falling. Plus we have a population increase of circa 600,000 which should help the numbers. So this weak data might be seen as one indicator which suggests a further RBA rate hike is not needed, as the tightening is now showing, though of course the various tax cuts and other Government support flowing from 1 July 2024 worth at least $20 billion could well boost household spending.
At very least it does appear the Government and RBA are pulling in different directions – in what Tarric Brooker has coined as “burnout economics”- I love the smell of burnout in the morning!
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