Australian household spending rose by 0.8% in June, outpacing the 0.2% lift forecast by markets. Lower fuel prices due to the federal excise tax cut helped stave off cost of living concerns and higher interest rates, boosting distortionary-related spending. Excluding inflation, spending volumes increased by 0.7% across the quarter, rising solidly through the first half of the year (1.5%). The RBA is unlikely to hike rates next week; however, robust demand is a key factor that has helped sustain the Board's hawkish narrative.
Household spending rose 0.8% nationally in June, driven by strong demand in discretionary-related categories (1.2%). Although spending slowed relative to May (1.2%) this latest outcome far exceeded modest expectations (0.2%) and was up 6% over the year despite a backdrop of economic headwinds and weak sentiment. Key gains in spending came in transport (3%) and recreation and culture (1.4%).
Transport spending lifted 3% in the month, with the ABS reporting this reflected an acceleration in EV demand amid the fuel price shock, while airline travel rebounded to levels seen prior to the eruption of the conflict in the Gulf. Those dynamics offset declining spending on fuel as the federal excise tax cut continued to lower prices at the bowser.
Meanwhile, households also spent up on tickets for upcoming concerts and live events, while increased gambling was linked to sporting events. These factors saw the recreation and culture category rise 1.4% in June.
For the June quarter, household spending in volume or inflation adjusted terms rose by 0.7% to be up by 2.4% over the year. This follows similar growth in volumes in the previous two quarters of 0.9% and 0.8%, indicating that demand has held up despite higher interest rates, cost-of-living pressures renewed by the oil price shock and weak sentiment.
A range of categories contributed to volume growth in the quarter including alcohol and tobacco (2.7%), furnishings and household equipment (1.7%), recreation and culture (1.7%) and hotels, cafes and restaurants (1%).
