Australian household spending saw its weakest result since late 2023, falling 1.1% in April. Transport-related spending was the major driver (-4.7%) as households cut back on travel due to the higher cost of airfares, while the halving of the fuel excise duty and cheaper public transport fares also played a role. A 0.4% decline in spending excluding transport provided further signs of demand destruction, with discretionary spending seeing its largest fall in more than two years (-0.8%). This adds to the run of weaker-than-expected data, markets now not pricing in further RBA tightening until much later in the year.
Household spending fell by 1.1% in April, a downside surprise on the 0.4% decline expected, after the fuel price shock boosted spending in March (1.6%). The higher cost of airfares saw households shelve travel plans, while the cut to the fuel excise tax and state governments heavily subsidising public transport caused transport-related spending to fall 4.7%, its largest decline since the pandemic. This also incorporates refunds from airlines cancelling services made less viable by higher fuel costs. Working in the other direction, electric vehicle sales picked up. Other notable declines came in clothing and footwear (-2.2%) and food (-1.3%). The largest gains in spending came in health (0.5%) and hotels, cafes and restaurants (0.5%).
Spending excluding transport still declined by 0.4% in the month, a sign consistent with broader demand destruction - even though fuel prices dropped sharply in April (see here) after the excise tax cut. The ABS estimates that the volume of fuel sales increased 2% in April, rebounding from a 1.5% fall in March.
Further signs indicative of demand destruction came via a 0.8% fall in discretionary-related spending, its largest decline since February 2024. Higher prices for airfares due to increased fuel costs were a key factor that weighed on discretionary spending.
