SYDNEY, May 10 (NNN-AGENCIES) – The Commonwealth Bank of Australia (CBA), the country’s largest bank, released data showing that residents are beginning to pull back on their spending, amid rising inflation and interest rates.
The CommBank Household Spending Intentions (HSI) Index, which measures consumer sentiment, based on card spending data and publicly available loan application and search trends, was released today.
It showed a drop of 3.8 percent in Apr, after reaching a record high in Mar. Australians were shown to be spending less on homes, health and fitness, and transport spending, but were spending more on travel, entertainment and retail.
Commonwealth Bank of Australia senior economist, Belinda Allen, said, despite the drop, the 2022 Apr index was still an improvement from Apr of 2021.
“With an interest rate hiking cycle now underway, the Australian economy is in a strong position.”
“We are seeing a post COVID normalisation of consumer spending patterns, with lower spending on categories that increased during lockdowns,” said Allen.
In the last several weeks, Australia’s central bank, the Reserve Bank of Australia (RBA), has been forced to lift interest rates for the first time in over a decade, in response to headline inflation soaring past five percent.
In a recent interview, chief economist at financial advisory firm, KPMG Australia, Brendan Rynne, said that, this would help curb demand-side inflation.
“(As) homeowners start to contend with higher interest costs … that’s then going to also translate into lower consumption spending.”
He added that, this also means that Australian’s real purchasing power would decline overtime, as inflation outpaces stagnated wage growth.
The CBA immediately lifted their interest rates for customers, following the RBA’s 0.25 percentage points increase on the cash rate last week.
Allen from the CBA said, the bank expects the cash rate to continue to be lifted through to Feb, 2023, bringing the cash rate to 1.60 percent.
“Households have accrued a very high level of savings during COVID, the labour market remains tight and wages growth is accelerating. These factors will assist families with higher mortgage repayments over coming months.”– NNN-AGENCIES
