Surging fuel prices drove Australian household spending to its fastest rise in over two years, increasing by 1.6% in March. Spending in the transport category (including fuel) accelerated by more than 5%, its sharpest rise since the last major conflict in the Ukraine caused global energy prices to soar in early 2022. Fuel prices went up by 33% in March, which the ABS estimates led to a 1.3% fall in the volume of fuel purchased, while spending on public transport increased.
Household spending rose by 1.6% in March, its fastest month-on-month increase since January 2024. Annual growth lifted from 4.7% to 6.3%, a 2½-year high. These figures are based on nominal spending; thus they reflect the impact of the 33% rise in fuel prices in response to the closure of the Strait of Hormuz.
With fuel prices surging and public transport usage rising, transport spending rose by 5.1% in the month. From April 1, the Federal Government temporarily lowered the fuel excise tax, contributing to lower prices for consumers. However, higher costs for airfares and other forms of travel will flow through.
There were no clear-cut signs that higher fuel prices were causing demand - though it is still early days. Non-discretionary spending rose by 0.6% in March. Hotels, cafes and restaurants saw some weakness (-0.9%), but other discretionary-related categories rose, such as recreation and culture (1.3%) and household furnishings and equipment (1.6%) - the latter rebounding from recent declines. Fuel caused non-discretionary spending to accelerate by 3.4% in the month, its fastest rise since the stockpiling efforts during the pandemic.
Volume estimates for the March quarter reported a 0.7% increase in real household spending, marginally softer than the 1% rise in the previous quarter. Annual growth firmed from 2.5% to 2.8%, a solid pace at highs since the June quarter 2023.
Several categories saw quarterly volumes increase, including food (0.8%), health (1.5%), transport (1.7%), recreation and culture (1.1%) and other goods and services (1.1%). Declines were recorded across alcohol and tobacco (-2.4%), clothing and footwear (-1%), furnishings and household equipment (-0.7%) and hotels, cafes and restaurants (-0.1%).
