How much is household spending falling in Australia?

Renters experience minimal annual spending growth compared to mortgage owners and outright owners

How much is household spending falling in Australia?

There was restrained consumer sentiment following the early Easter spending surge, according to the latest industry report from the Commonwealth Bank of Australia (CBA).

The CommBank Household Spending Insights (HSI) Index declined by 1% in April to 148.11, reflecting a slowdown in annual spending growth to 2.6%, down from a peak of 149.7 in January 2024. This drop follows a temporary increase in March, attributed to an early Easter.

Despite a rise in essential spending categories such as education (up 3.7%), utilities (up 2.5%), and motor vehicles (up 1.7%), there was a notable pullback in food and beverage (down 3.8%), hospitality (down 3.3%), and recreation (down 2.6%). Discretionary spending across all categories saw a 4.4% decrease in April.

The latest HSI report also introduced new Home Ownership Insights, highlighting spending patterns among different homeowner types. It showed that renters experienced a minimal annual spending growth of 1.3%, compared to 4.5% for mortgage owners and 6.3% for outright owners.

A new per capita analysis of the index, accounting for population growth, indicated an annual spending growth rate of just 1.4%.

Regionally, Victoria recorded a 1.2% decline in spending for the month and only a 1.9% increase year-over-year. In contrast, South Australia and Tasmania both registered a 0.3% rise, with Tasmania emerging as the state with the highest annual growth at 4%. New South Wales posted a marginal increase of 0.1%.

“The April HSI paints a picture of a constrained consumer following an early Easter bump in March,” said CBA chief economist Stephen Halmarick (pictured). “Significantly, the annual rate of household spending has fallen from 3.9% in March to 2.6% in April, led by a large drop off in discretionary spending, which is down 4.4%.

“We can see from the new Home Ownership Insights included in this month’s report that renters in particular have cut back, with spending just inching higher at 1.3% over the year, while those who own their home outright experienced the strongest spending growth at 6.3% annually.

“We expect weak consumer spending and below-trend economic growth to continue throughout 2024, and despite recent inflation data surprising to the upside, we anticipate the RBA will cut interest rates in November this year.”

The CommBank HSI index, based on de-identified payments data from approximately seven million CBA customers, captures about 30% of all Australian consumer transactions, offering a broad view of spending trends across various states and territories.

Have your clients indicated they are cutting down on their spending? Share your thoughts below.