Australian consumers have continued to tighten their belts in July, with spending growth falling nationally to just 1.3% in the year to July and with Victoria leading the declines.
This was according to the recently launched monthly CommBank Household Spending Insights (HSI) Index, which uses de-identified payments data from roughly 7 million CBA customers, comprising roughly 30% of all Australian consumer transactions, to reveal the latest trends in spending activity.
Building upon the previous Household Spending Intentions series, the CBA payments data was now aligned to the ABS spending categories and census-weighting to be nationally representative, as well as being seasonally adjusted.
“The latest findings of CommBank Household Spending Insights Index provide powerful insights into Australian consumer activity at a critical time for the country economically,” said Stephen Halmarick (pictured above), CBA chief economist. “It is a very comprehensive report and includes a number of statistical enhancements that build on our previous tracking of consumer spending.”
The CommBank HSI Index for July remained unchanged at 135.2. Spending growth, however, dropped to an annual rate of just 1.3% from a peak of 18.2% in August 2022.
Household goods, transport, hospitality, education, insurance, health and communications, and digital recorded growth in July, but these gains were offset by declines in household services, recreation, utilities, motor vehicles, and food and beverage goods spending, Halmarick said.
South Australia registered the strongest household spending growth in July, at +1.9%, followed by Victoria and NSW (both +1.7%), while Northern Territory (+0.1%) and Queensland (0%) were flat.
But over the past 12 months, it was Western Australia that posted the strongest household growth, at +3.5%, followed by South Australia and the Northern Territory (both +3.4%), while NSW (-0.2%) and Victoria (-0.3%) were the weakest.
Halmarick said the significant overall slowdown in household spending, as measured by the CommBank HSI Index, clearly reflected the impact of 400bp of RBA interest rate hikes.
“Monetary policy is now restrictive and financial conditions will continue to tighten in the months ahead on the lagged effect of RBA interest rate increases and the fixed rate mortgage refinancing task,” he said. “We continue to expect household spending to weaken further over the remainder of 2023 and 2024.
“While the RBA is likely to hold the cash rate at 4.1% for an extended period, we expect it will start lowering interest rates in March next year to 3.1% by the end of 2024 - in response to a slowing economy, inflation closer to target and a softer labour market.”
David Watts, CBA executive general manager of quants, data, analytics, and technology (QDAT), said the new report combines the analytical strength of CBA’s global economic and markets research team with data provided by CommBank iQ, a joint venture with data science and artificial intelligence company Quantium.
“As Australia’s largest bank, our de-identified customer transaction data provides powerful insights into consumer spending trends,” Watts said. “Released each month ahead of the official ABS quarterly reports on consumer spending, this new CommBank HSI Index gives our institutional and business clients advanced notice and analysis of developing spending trends and their potential impact.”
Andrew Hinchliff, CBA group executive of institutional banking & markets, said the new monthly CommBank HSI Index will highlight how macro-economic trends are impacting Australian households and businesses.
“The CommBank HSI Index provides a unique and current read on consumer spending behaviour and how macro developments like changing RBA interest rates are playing out in the real economy,” he said.
For more information on the monthly CommBank HSI visit commbank.com.au/hsi.
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