Consumer slowdown may have already begun

“For some of these more vulnerable households, the impact of price rises will be mitigated to some extent by the indexation of social assistance payments twice per year, although price rises will reduce recipients’ real incomes in the near term.”

Larger-than-expected falls in house prices or other asset prices would mean household spending could be even weaker than the RBA is forecasting.

“The magnitude of the decline of housing prices arising from higher interest rates is uncertain, especially given the high level of prices relative to incomes,” the RBA said.

Households dial it back

While the RBA is not forecasting consumption growth to slow until next year, internal credit and debit spending data from CBA shows total spending has been falling since mid-May, when the RBA began raising rates.

The RBA lifted the cash rate target by a further half-percentage point this week to 1.85 percent. Markets are pricing the central bank will raise rates to 3.1 percent by the end of the year.

Spending on recreation, eating out and household goods had all eased in recent months, said Commonwealth Bank associate economist Harry Ottley.

“Essential spending categories that are less price elastic have seen spending hold up, with transport, utilities and food all remaining resilient,” Mr Otley said.

“Spending on transport has eased slightly as the price of fuel has declined from recent highs, providing consumers with some relief.”

Mr Otley said the moderation in spending was expected given low levels of consumer confidence.

“With spending on discretionary items already easing, it is likely that the increased cost to mortgage holders will put more downward pressure on household consumption in the coming period,” he said.

In another sign activity could be slowing, the number of job ads fell for the second consecutive month in July, a SEEK report showed on Thursday.

There were tentative signs that labor demand could have peaked, said NAB economist Taylor Nugent. The decline in job advertisements was broad-based across industries, with the steepest falls in the hospitality and tourism industry.

“Two alternative explanations for the decline in new job ads could be employers giving up advertising for new staff given the labor shortage, or more migrants coming across the international border which may be easing pressures in certain industries,” Mr Nugent said.

Despite the monthly falls, job ads remain elevated at 60 percent above pre-pandemic levels.

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