The CommBank Household Spending Intentions Index (HSI) increased by 8% in March to 119.3 following declines in January and February.

The data shows the boost in March was led by a seasonal increase in the transport (19%), entertainment (17.2%), and retail (12.6%) sectors. 

It’s important to note the increases in March were partly due to the longer month.

CBA Chief Economist Stephen Halmarick said spending on transport has almost returned to pre-pandemic levels. 

“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,” Mr Halmarick said.

The HSI revealed education spending rose 7.6% in March, or 9.3% year on year with school and higher education fees largely due for payment in this month. 

Mr Halmarick said increased education spending was not surprising 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. The increase in education spending is a welcome development, largely supported by the return of international students to our shores,” he said.

Despite recording an uptick in household spending last month, the index’s annual rate of growth continues to moderate, falling to 3.8% in March and well below the peak of 15.2% in August 2022.

“The slowdown in spending growth indicated the RBA’s consecutive interest rate increases are having a real impact on household spending,” Mr 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.”

With inflation now running at 6.8% in February, real household spending is negative. 

“This reinforces the view that once you take into account inflation, taxes, and debt interest costs, real household disposable income is falling,” Mr Halmarick said.

“This will only get worse through 2023 on the lagged effect of higher interest costs and as wages growth struggles to keep up with the pace of inflation.”

CBA’s economics team is forecasting a 25 basis point interest rate increase in May to reach a peak cash rate of 3.85%. 


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