Household spending won’t substantially increase until rates are lowered

The latest CommBank Household Spending Insights (HSI) Index rose by 1.3 per cent to 156.9 index points in November, largely driven by a 5.7 per cent increase in spending on household goods due to Black Friday/Cyber Monday shopping sales.

Despite the monthly increase, the annual HSI growth rate decreased to 2.7 per cent in November, down from 4.2 per cent in October, with the biggest annual spending increases being on hospitality (7.6 per cent), essential services (5.2 per cent) and health (5 per cent).

The report revealed further disparity in spending among the different observed household types (owner with mortgage, owner outright and renter), with spending by renters increasing by only 0.4 per cent in the year to November, while mortgage holders and outright home owners increased their spending by 1.6 per cent and 2.7 per cent, respectively.

Mortgage holders reduced spending on utilities (7 per cent), transport (7 per cent) and motor vehicles (4 per cent) over the year. The report noted that these are areas where government subsidies and lower petrol prices contributed to the lowered price level.

Meanwhile, the largest contributors to mortgage holders over the past year were food and beverage goods (18 per cent), hospitality (9 per cent) and recreation (13 per cent).

For outright home owners, the main contributors to increased spending in the year to November were recreation (14 per cent), household services (5 per cent), food and beverage goods (18 per cent) and insurance (11 per cent).

This cohort reduced spending in household goods (15 per cent), transport (7 per cent) and utilities (8 per cent).

Commenting on the data, CBA chief economist Stephen Halmarick, said: “Bargain hunters taking advantage of Black Friday sales drove an increase in spending in November, broadly in line with 2023, and we expect to see a drop off in spending in December as we have seen in previous years.

“We’re seeing Black Friday and holiday spending shift earlier as retailers entice shoppers with early discounts on discretionary items. Collectively, sales for October and November 2024 were up 2 per cent compared to the same period last year.

“Our view remains that a substantial increase in household spending is unlikely to occur until the RBA starts lowering interest rates. Our base case is a start to rate cuts in February 2025, but with a clear risk that this is delayed until later this year.”

[RELATED: Borrowers may have to compromise amid housing challenges]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.