Australian household spending jumps 0.8pc in June as fuel spike accelerates EV sales

Australian household spending jumped beyond estimates in June as consumers speed up the shift to electric vehicles in the wake of Donald Trump’s war in Iran and the ensuing fuel crisis.

Ahead of the Reserve Bank’s meeting next week, some economists on Tuesday warned the better-than-expected household spending data gave the institution “a little more ammunition” to hike interest rates.

The Australian Bureau of Statistics data showed household spending lifted 0.8 per cent to $81.3 billion in June, beating estimates for a 0.2 per cent growth. It follows a 1.2 per cent jump in May.

Household spending is now up 6 per cent year-on-year.

The monthly gain was led by transport, up 3 per cent, largely driven by the acceleration in EV sales as Australians battle rising petrol costs.

“Electric vehicle sales increased significantly over the year and have continued that trend in June, accounting for a growing share of overall new vehicles sales as households adjust their spending behaviour in response to rising fuel prices,” ABS head of business statistics Tom Lay said.

Australians are increasingly drifting away from internal combustion engines, with EVs and hybrid vehicles now making up almost half of new car sales in the three months to June.

Fuel prices are again hovering around $2 a litre after the Federal Government’s scaled-back 16¢-a-litre extension of the fuel excise reduction for petrol and diesel ended this week.

Oxford Economics Australia economist Harry McAuley said despite still-high interest rates and lingering inflation pressures, households continued to show a willingness to spend.

“The reasonably strong growth in quarterly volumes gives the RBA a little more ammunition should they decide they need it,” he said.

“Bearing in mind the data doesn’t reflect the full term of rate hikes, today’s print shows consumers are still spending at a decent clip.”

The RBA has already raised the cash rate three times in quick succession this year, pushing it up to 4.35 per cent to tame resurgent inflation, which has held stubbornly above the 2-3 per cent target band.

While traders have abandoned bets for a rate rise next week after the latest inflation data undershot forecasts, they still expect the next move to be a hike.

Headline inflation eased to 3.8 per cent in the year to June.

The RBA’s preferred measure of underlying inflation, without volatile price items, was at 3.6 per cent.

AMP economist My Bui said while the lower-than-expected inflation data for June provided the RBA with some space to hold rates at next week’s meeting, recent stronger data in spending and job advertisements would keep the board on a tightening bias.

The ABS data revealed air travel was the second biggest contributor to transport, as it returned to levels not seen since the Middle East conflict broke out in March.

Household spending increased for all eight States and Territories, with Tasmania leading the gains at 1.6 per cent. It was followed by the ACT (up 1.4 per cent) and WA (up 1.3 per cent).