- Cashed up with this year’s outsized tax refunds, Australians are looking to spend, according to Commonwealth Bank analysis, in a much-needed coup for the economy.
- Consumers look set to increase their spending on retail, entertainment, houses and travel, with the lower Aussie dollar keeping more of that money in the country.
- The shopping urge has been supported by renewed confidence in the housing market, as prices rebound creating a positive wealth effect.
The country is about to go shopping on a scale not seen in a long time, and it might be exactly what the doctor ordered.
As Australians find themselves uncharacteristically flush with cash after receiving their tax cut, they’re getting set to spend it according to the Commonwealth Bank (CBA).
“The inflow of tax refunds into CBA accounts reveals a sharp lift in both the total value of those refunds and the average size of a refund,” CBA chief economist Michael Blythe said in a research note supplied to Business Insider Australia.
“Over the July [and] August period, the value of inflows was about 40% above ‘normal’ levels… the boost to household spending power is larger and coming through sooner than originally expected,” he said.
CBA regularly takes the temperature of household spending intentions, with their latest measure finding Australians are either willing to spend more on most categories except cars.
According to the analysis, Australians are set to splash more cash on houses, travel, retail and entertainment. Those last two, in particular, are good news after months of declining consumer spending. A lower Aussie dollar also means that more of that travel looks set to be domestic, keeping more money in the local economy.
Education and health and fitness spending meanwhile remained fairly flat, while intentions to spend on motor vehicles continued to decline in line with house prices since late 2017.
Overall, consumer sentiment has been flat since May. A significant spike in August, however, has put projected retail spending back in positive territory for almost the first time this year, with “a combination of tax rebates and the improving housing market are leading the charge”, according to Blythe.
Car purchases, however, continue to drag.
“These [car buying] intentions are off their absolute lows but they remain deeply mired in negative territory. It seems that the negative “wealth effect” from earlier falls in dwelling prices lingers on in some areas of consumer spending,” Blythe said.
That could be set to change however, with prices in the largest two cities seeming to have found a floor.
“The housing market has turned sooner and more aggressively than expected and CBA’s HSI for home buying points to further solid improvement ahead.”
It’ll be music to the Reserve Bank of Australia’s (RBA) ears. It has long signalled that household spending – the largest part of the Australian economy – is what’s needed to get the country ticking over again.
So when you’re next engaged in some retail therapy, you can at least claim it’s part of your civic duty.
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