Household budgets feel the pinch after petrol prices, inflation 'surge'

Following a revised 9.5% drop in January, CommBank's Household Spending Index (HSI) rebounded in February, rising 1.8% to reach an index score of 107.3. 

CommBank's HSI series includes 12 spending categories, covering the majority of all consumer spending.

Transport spending intentions surged 11% in February, driven by higher fuel prices and increased spending on taxis, parking lots, car washes, freight and trucking services. 

The NRMA said 91 unleaded fuel prices could reach $2 per litre soon.

Home buying spending intentions rose 29.6% as people returned from summer holidays, yet were down 4.4% in comparison to February 2021.

Insurance costs were down a marginal 0.6% in February, yet CBA economists believe recent floods across the east coast of Australia will weigh on this category over the next few months.

CBA Chief Economist Stephen Halmarick said the rise in the CommBank HSI Index in February showed Australians were back on the move following the end of COVID restrictions, yet events unfolding across the globe are set to have three main implications. 

"We see three main implication for the Australian economy from the Ukraine situation - market sentiment and a ‘flight to quality’; higher energy prices and inflation; and reduced global growth," Mr Halmarick said.

Read more: What does rising inflation actually mean? 

Recently, ME Bank's Household Financial Comfort Report revealed the cost of necessities has surged to be the most significant worry for 43% of Australian households.

ME Bank’s Consulting Economist Jeff Oughton said the rising costs of necessities and flat wages growth are a growing worry among households.

"On the surface, the financial comfort of the average Australian looks better than ever, but it’s fragile," Mr Oughton said.  

In the immediate short-term, AMP Chief Economist Shane Oliver said it’s important that Australians remain cautious of their spending behaviours, continue to pay down debts, home loans and not get carried away by everything re-opening.

Crude Oil is up 69% over the last 12 weeks and at its highest level since 2008.

Only times in history where Oil was up more than this over 12 weeks...

-August 1990 when Iraq invaded Kuwait (US recession began that month).
-June 2020 when prices bounced after the pandemic crash. pic.twitter.com/AJbWgnkGsX

— Charlie Bilello (@charliebilello) March 7, 2022

Advertisement

Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest interest rates on the market.

Image by Jay Skyler via Unsplash