The Australian Bureau of Statistics (ABS) released its Monthly Household Spending Indicator for September on 4 November. Spending rose 0.6 per cent in seasonally adjusted terms, recovering from a 0.1 per cent dip in August, and sat 6.8 per cent above the same month a year earlier. On the face of it, households have absorbed five rate rises in a year and carried on much as before.
The composition tells a more complicated story. Over the month, spending on essentials rose 1.2 per cent, four times the 0.3 per cent rise in discretionary spending. Transport and health each rose 1.5 per cent, while furnishings and household equipment fell 0.2 per cent and clothing and footwear barely moved. The caveat worth stating is that this tilt is a recent-months phenomenon: across the full year the two run close together, discretionary spending up 6.9 per cent against 6.5 per cent for essentials.
Fuel is the clearest illustration. Spending on it rose 5.4 per cent in a single month, driven by higher global oil prices and the end of fuel excise relief on 3 August. Almost none of that is households buying more petrol. The ABS’s experimental volume data shows the quantity of fuel bought actually fell 2.2 per cent over the month. Households bought less petrol and paid more for it.
That gap between dollars and quantities runs through the series. The headline indicator is measured in current prices, so it climbs when prices rise even if households are buying no more than before. The ABS does publish a volume measure, and it rose 0.7 per cent in the September quarter, so Australians are still buying a little more in real terms. But with headline inflation at 4.3 per cent, a 6.8 per cent annual rise in dollars spent represents a far smaller rise in what people are actually carrying home.
None of which makes the figure irrelevant to the Reserve Bank. The opposite. The board that lifted the cash rate to 4.85 per cent on 3 November split six to three, with the three in the minority wanting to hold at 4.60 per cent, and a spending series that keeps climbing is precisely the evidence the majority of six leans on. The next instalment, covering October, is published on 30 November, eight days before the board’s final decision of the year.
MPJ Takeaway
The resilient consumer has been doing a great deal of work in the argument for higher rates, and September’s detail shows how little is holding it up. Essentials rose four times faster than discretionary spending over the month, and the single largest mover was petrol, for reasons that have nothing to do with confidence and everything to do with the crude oil price and an expired excise discount. Our expectation is that the board holds at 4.85 per cent on 8 December. The risk to that call sits in the 30 November release: a hot October number, read at face value as this one largely was, mistakes a measure of dollars for a measure of appetite.
The composition tells a more complicated story. Over the month, spending on essentials rose 1.2 per cent, four times the 0.3 per cent rise in discretionary spending. Transport and health each rose 1.5 per cent, while furnishings and household equipment fell 0.2 per cent and clothing and footwear barely moved. The caveat worth stating is that this tilt is a recent-months phenomenon: across the full year the two run close together, discretionary spending up 6.9 per cent against 6.5 per cent for essentials.
Fuel is the clearest illustration. Spending on it rose 5.4 per cent in a single month, driven by higher global oil prices and the end of fuel excise relief on 3 August. Almost none of that is households buying more petrol. The ABS’s experimental volume data shows the quantity of fuel bought actually fell 2.2 per cent over the month. Households bought less petrol and paid more for it.
That gap between dollars and quantities runs through the series. The headline indicator is measured in current prices, so it climbs when prices rise even if households are buying no more than before. The ABS does publish a volume measure, and it rose 0.7 per cent in the September quarter, so Australians are still buying a little more in real terms. But with headline inflation at 4.3 per cent, a 6.8 per cent annual rise in dollars spent represents a far smaller rise in what people are actually carrying home.
None of which makes the figure irrelevant to the Reserve Bank. The opposite. The board that lifted the cash rate to 4.85 per cent on 3 November split six to three, with the three in the minority wanting to hold at 4.60 per cent, and a spending series that keeps climbing is precisely the evidence the majority of six leans on. The next instalment, covering October, is published on 30 November, eight days before the board’s final decision of the year.
MPJ Takeaway
The resilient consumer has been doing a great deal of work in the argument for higher rates, and September’s detail shows how little is holding it up. Essentials rose four times faster than discretionary spending over the month, and the single largest mover was petrol, for reasons that have nothing to do with confidence and everything to do with the crude oil price and an expired excise discount. Our expectation is that the board holds at 4.85 per cent on 8 December. The risk to that call sits in the 30 November release: a hot October number, read at face value as this one largely was, mistakes a measure of dollars for a measure of appetite.