Despite consumer spending remaining tentative, a resurrected housing market continues to offer a silver lining for the future, new reports have found.
According to recent data released by the Commonwealth Bank (CBA), tax refunds and confidence in the housing market has supported a rise in spending intentions for the first time since the start of the year. Using a combination of CBA transaction data and Google Trends search data, the Household Spending Intentions (HSI) series provides insight into Australian consumer trends.
The latest data from the Commonwealth Bank Household Spending Intentions series revealed that Aussies intend to spend more in most areas except for motor vehicles.
CBA Chief Economist, Michael Blythe, says a strong housing market and income tax refunds have supported the resurgence in spending intentions.
“Significantly, the home buying spending intentions series has moved back into positive territory and this should help drive a further improvement in retail spending intentions in the months ahead,” he said.
Mr Blythe added that CBA data indicates that the housing market will continue to show “solid improvement” in the near future.
Australians were quick to file their tax returns this year, with a boost in spending arriving much sooner than expected thanks to the inflow of tax refunds.
However, whether or not these intentions will actually manifest remains to be seen. With the Reserve Bank of Australia cutting the cash rate to 0.75 at the start of the month, economists believe Australians remain fearful and conservative with spending. Yet, sentiments about the housing market remain high across the board, providing hope for the near future.
Here’s how Aussies may be spending their money in the months ahead.
With tax refunds coming in thick and fast, spending intentions returned to a positive position in the HSI, indicating stimulated retail spending may be just around the corner.
However, a conflicting Consumer Sentiment Index report compiled by Westpac and the Melbourne Institute in the first week of October, found consumers were still wary of the economy’s strength and weren’t likely to spend in this area.
CBA concedes that although intentions to spend are up, many people appear to be shopping imported goods, a trend the bank hopes will be curbed by the weak Australian dollar.
Having said that, a lift in housing turnover typically coincides with a rise in household-related spending, so we may still see some uplift.
Intentions to buy a home are accelerating at historic levels, the HSI suggests, peaking at its highest point in over a year.
Strong housing markets and rising house prices in Sydney and Melbourne markets may have a lot to do with these results.
The Westpac-Melbourne Institute Consumer Sentiment Index supported CBA’s findings, also reporting that housing market sentiments remained positive.
Belief that it is the right time to buy a home decrease by 5% since last month, although still remained positive overall. There was also an approximate 6% lift in house price expectations, with many believing dwelling values will remain on the up.
This is another area that was likely stimulated by tax returns. However, the aforementioned weak dollar may encourage some keen travellers to remain on home soil.
Despite intentions for travel spending remaining high, it might be a better time to invest locally rather than internationally.
Australians appear to be keen to get out there and live life. Like travel, intent to spend on entertainment is up, and with that spring weather in the air it’s the perfect time to get out and about.
Intentions to spend on education have risen ever-so-slightly although remain mostly consistent.
This was the main area people weren’t keen to spend money on, according to the September report. CBA noted this area has seen consistent fall since housing prices began to fall in 2017-18.
Big ticket items not related to housing might be out of the question for the time being while many remain focused on other areas of spending.
Health and Fitness
While not as slow as car sales, people aren’t as keen to pour their money into health and fitness at the moment. This isn’t to say it’s negative, but rather it remains steady.
Words by Rebecca Mitchell