Household spending won’t normalise until rates are cut

The CommBank Household Spending Insights (HSI) Index climbed by 0.8 per cent in October, reaching 152.5, up 4.9 per cent from the same time last year. There were 12 spending categories, with 10 out of these seeing an increase over the month.

1. Household goods (up 2.5 per cent).
2. Recreation (up 1.6 per cent).
3. Communications and digital (up 1.1 per cent).
4. Hospitality (up 0.9 per cent).
5. Health (0.9 per cent).
6. Household services (up 0.9 per cent).
7. Transport (up 0.7 per cent).
8. Motor vehicle (up 0.6 per cent).
9. Insurance (up 0.4 per cent).
10. Food and beverage goods (up 0.2 per cent).

The only spending areas to see a drop were education (down 1.3 per cent) and utilities (down 3.4 per cent).

Household goods refer to a variety of purchases. The most popular of which were online marketplaces, hardware stores, and discount department stores.

Events like the NRL Grand Final and Melbourne Cup have been some of the major events lately helping drive recreation spending, not to mention those that went on sale in October like the upcoming Oasis reunion, Metallica, Luke Combs, and the Melbourne F1. These major events likely shifted the scales, with ticket sales up a whopping 27 per cent throughout the month.

With inflation finally back below 3 per cent, it’s refreshing to see consumers once again spend on themselves and enjoy the fruits of their labour.

“Spending rose marginally in October as income tax cuts, lower petrol prices and energy rebates freed some consumers up to spend on discretionary items. It’s important to note however that this increase in discretionary spending only partially offset the fall seen in September as the October boost was driven by a number of one-off major events,” said CBA chief economist Stephen Halmarick.

Renters were less likely to spend than those with a mortgage, rising 1.8 per cent and 3.4 per cent over the year, respectively. Those who owned a home outright saw a 4.4 per cent increase.

Halmarick said that while there were slight increases in spending over the month, an RBA cash rate cut is what will spur significant boosts.

“Higher disposable income from the July income tax cuts, combined with lower petrol prices and lower utility bills may have helped strengthen spending in recent months, however the increase is likely softer than would have been expected by the RBA. We don’t anticipate seeing a substantial increase in consumer spending until the RBA commences an interest rate easing cycle, which we now expect in February 2025,” he said.

Related: Tax cuts have not caused ‘material rise’ in spending

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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