The CommBank Household Spending Intentions (HSI) Index jumped 8% in March, after declines in both January and February, driven by a significant rise in consumer spending on transport and education.
Despite the increase, the index’s annual rate of growth remained moderate, falling to 3.8% in March and well below the peak of 15.2% in August.
Transport spending intentions surged 19% last month – up 30.4% on the same period last year, as more workers returning to the office led to higher spending on public transport, car parks, and taxis.
The increase in the CommBank HSI was also due in part to increased discretionary spending in the entertainment, retail, travel, and education sectors.
“Spending on transport has almost returned to pre-pandemic levels,” said Stephen Halmarick (pictured above), CBA chief economist. “The increase in transport spending indicates more people are working from the office, rather than from home and this should have a positive impact on CBD economies.”
Education spending intentions lifted 7.6% last month, or 9.3% year on year, which was unsurprising, Halmarick said, given the return to face-to-face learning and the reopening of the international border to university students.
“Education is one of Australia’s biggest exports,” he said. “The increase in education spending is a welcome development, largely supported by the return of international students to our shores.”
The CBA economist said Australia’s monetary policy has tightened considerably over the past 12 months and financial conditions will continue to tighten through the rest of the year.
“The slowdown in spending growth indicated the RBA’s consecutive interest rate increases are having a real impact on household spending,” Halmarick said. “Despite the decision to hold interest rates steady earlier this month, consumer budgets will tighten due to the lag in impact on both variable and fixed rate mortgages.
“Additionally, with inflation now running at an estimated 7% for the March quarter real household spending is now negative. This reinforces the view that once you take into account inflation, taxes, and debt interest costs, real household disposable income is falling.”
Use the comment section below to tell us how you felt about this.
