‘Cracks beginning to show’: Australians trim the extras as fuel bills prop up spending

Australians hit the brakes on discretionary spending in August, with an 8.1 per cent jump in fuel spending keeping overall household spending from going backwards.

Total spending was unchanged after gains of 1.1 per cent in July and 0.9 per cent in June, but strip out fuel and it fell 0.3 per cent.

Households shelled out more at the bowser after fuel excise was fully restored from August 3, even though experimental Australian Bureau of Statistics figures suggest they bought less fuel. The volume purchased fell 0.5 per cent in August after tumbling 4.6 per cent in July.

ABS head of business statistics Tom Lay said transport spending rose 2.3 per cent, helped by fuel and new vehicle sales, while consumers cut spending across much of the rest of the household budget.

“Recreation and culture spending saw the largest fall, down 1.4 per cent, after months of higher spending associated with major sporting events,” Mr Lay said.

Oxford Economics Australia economist Oscar Guth said “cracks have started to show” after three months of strong household spending growth.

“Households are starting to trim the extras,” he said.

Six of the nine spending categories went backwards in August, with recreation and culture leading the falls while clothing, household furnishings, food and health also lost ground.

Mr Guth said the 2.3 per cent rise in transport spending partly reflected higher fuel prices in July and August, while stronger new vehicle spending that helped lift consumption in the June quarter also continued.

“We expect the slowdown to deepen over the coming year as a more hawkish Reserve Bank of Australia, weaker consumer confidence and renewed fuel-price pressures squeeze household budgets,” he said.

The pullback in household spending has done little to shift expectations the RBA will raise rates again on Tuesday, with financial markets heavily pricing a 0.25 percentage point increase to 4.6 per cent.

Inflation remains the bigger problem for the central bank, with underlying inflation running at 3.6 per cent, above its 2 to 3 per cent target band, even as households start cutting back elsewhere.