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CBA’s Household Spending Insights (HIS) Index for February highlighted a dip in consumer spending, falling 0.2 per cent.
People are being more frugal with money as economic strain persists, with a fall in spending on recreation (down 1.6 per cent) and hospitality (down 1.2 per cent).
Also falling was spending on food and beverage (down 0.7 per cent), education (down 0.6 per cent) and transport (down 0.5 per cent).
For the most part, non-essential spending is what has seen a drop. According to CBA senior economist Belinda Allen, one rate cut was not enough to turn the dial and only after more action will consumer habits shift.
“Looking ahead for the year, we believe it will take further interest rate relief to lift national consumer spending. We expect the RBA to cut interest rates in May with data for the first quarter of 2025 confirming inflation is tracking toward the RBA’s 2–3 per cent target,” Allen said.
“The lift we saw in spending at the end of 2024, driven by discount and sales activity, hasn’t carried through to the New Year as constrained consumers dedicate a large portion of their wallet to spending on the essentials.”
The growth rate of the HSI has slowed down. There are a few factors influencing this, such as a shorter February due to the 2024 leap year and the Taylor Swift concert of last year.
Clearly in 2025 people are prioritising the essentials, as spending lifted for utilities (up 1.9 per cent), health (up 0.7 per cent), insurance (up 0.7 per cent), household services (up 0.4 per cent) and motor vehicle (up 0.1 per cent).
However, not all of the country was united, as some areas saw increased spending while others dipped.
For example, the ACT and Tasmania saw a decline in annual growth, down 1.6 per cent and -0.2 per cent, respectively.
Victoria rose 0.7 per cent, outshined by Western Australia (up 2.3 per cent), South Australia (up 2 per cent), Queensland (up 1.9 per cent) and NSW (up 1.7 per cent).
“Annual spending has been mixed across the country and we await the March spending data to gauge the impacts of ex-Tropical Cyclone Alfred with parts of Queensland and northern NSW heavily impacted by the natural disaster,” Allen added.
The year ahead already has unpredictability in the air. CBA has penned another rate drop in May but whether this happens or not is up in the air. US President Donald Trump is likely to have continued impact in the wake of tariffs.
Broker Daily will continue to monitor these trends.
