Australian Households Shift Spending Priorities

(Reuters) – In July, Australian households focused on essential services such as healthcare, opting to save extra cash from recent tax cuts amid stubborn inflation and high mortgage rates.

Data from the Australian Bureau of Statistics revealed that overall household spending increased by 0.8% in July, just recovering from a 0.5% decline in June.

Spending on non-discretionary goods and services rose by 1.4%, the highest monthly growth since September of last year, with 6.8% growth in healthcare spending.

In addition, Australians spent more on miscellaneous services, such as vehicle maintenance. Robert Ewing, the ABS head of business statistics, noted that “non-discretionary spending grew faster than discretionary spending” due to ongoing cost-of-living pressures.

Year-on-year growth in total spending has halved since February, now standing at 2.9% in July. Although households began to see benefits from tax cuts and electricity rebates, much of the extra cash was saved, leading to a 2.1% increase in household deposits, equating to A$31 billion ($20.78 billion), the largest growth in three years, according to the Reserve Bank of Australia (RBA).

Additional government data showed a 0.2% decrease in household spending during the April-June quarter, marking the slowest growth rate for the economy since the early 1990s, barring pandemic distortions. Gareth Aird, head of Australian economics at CBA, mentioned that “spending on many discretionary categories fell in the quarter,” with food spending down by 1%.

He added, “Households are not eating less, but they are trading down on the type of food they are buying,” indicating significant cost-of-living pressures at play.

($1 = 1.4919 Australian dollars)