Australian consumers put essentials first as cost pressures persist By Reuters

(Reuters) – Australian households prioritized spending on essential services such as healthcare in July, choosing to save extra cash from recent tax cuts as they grappled with stubborn inflation and high mortgage rates.

Data released Wednesday by the Australian Bureau of Statistics showed overall household spending on a seasonally adjusted basis rose 0.8 percent in July, although it just recovered from a 0.5 percent drop in June.

Spending on non-discretionary goods and services rose 1.4 percent, the fastest monthly increase since last September, with health spending rising 6.8 percent.

In July, Australians spent more on various goods and services, such as vehicle repair or maintenance.

“Non-discretionary spending grew faster than discretionary spending as households continued to face cost-of-living pressures,” said Robert Ewing, ABS head of business statistics.

Annual growth in total spending halved from February to 2.9% in July. Households began receiving billions of dollars in tax cuts and power cuts in July, but appeared to have saved most of it as deposits rose this month.

Household deposits rose 2.1 percent in July, or $US31 billion ($20.78 billion), the fastest monthly rise in three years, data from the Reserve Bank of Australia (RBA) showed.

Other government data released on Wednesday showed household spending fell 0.2 percent in the April-June quarter, dragging the economy to its slowest growth since the early 1990s, excluding the distortion of the pandemic.

“Spending across many discretionary categories fell this quarter,” said Gareth Aird, head of Australian economics at CBA, noting that even food spending fell 1% in the quarter.

“Households are not eating less, but they are changing the type of food they buy,” he added. “This is a clear sign of cost of living pressures.”

($1 = 1.4919 Australian dollars)