Australia's household spending has remained stagnant despite recent tax cut reforms, raising concerns about the economic outlook. Data from the Australian Bureau of Statistics (ABS) released on October 4 indicates that household expenditure was flat in August, following declines of 0.5 percent in July and 0.1 percent in June.
ABS head of business statistics, Robert Ewing, noted that growth in household spending has stalled at the beginning of the financial year, even as the federal government's Stage 3 tax cuts took effect on July 1. Labor Treasurer Jim Chalmers highlighted a 0.2 percent fall in household consumption, attributing it to inflationary pressures causing households to cut back on discretionary spending.
The report also revealed the lowest annual household savings ratio in 17 years, indicating significant financial strain on households. While spending on services increased by 0.4 percent in August, driven by higher expenditures on air travel, accommodation, and dining, this was counterbalanced by a 0.3 percent decline in spending on goods, particularly new vehicles and fuel.
Last year, most regions experienced growth in household spending, with Western Australia leading at 3.9 percent. The International Monetary Fund (IMF) cautioned that while cost-of-living support may temporarily alleviate price pressures, it could also stimulate broader economic activity, complicating inflation control.
The IMF's annual report on Australia's economy forecasts a gradual recovery, predicting growth of 1.2 percent in 2024 and 2.1 percent in 2025, driven by real wage growth and strong public demand. However, these predictions are slightly more optimistic than those from the Reserve Bank of Australia (RBA), which suggests inflation control may not be achieved until mid-2025.