Australians are still reluctant to splash out on retail and cars despite tax cuts and lower interest rates, with new data showing spending intentions are weak.
The inaugural edition of Commonwealth Bank’s Household Spending Intentions Series uses Google Trends search data and CBA transactions to test consumer sentiment, and the results aren’t good for retailers.
Retail spending has steadily trended lower since the start of 2018, and apart from the occasional bounce, the CBA report expects it to continue to decline.
Motor vehicle spending has also dropped from a high in 2017, as households appear to show more caution in making large purchases.
“But other sectors appear to be bottoming out – including travel and entertainment, or picking up – including health and education,” CBA chief economist Michael Blythe said.
“The (upward) turn in home buying intentions is particularly noticeable in recent months.”
The federal government has so far rejected calls to spend more money on infrastructure and increase the rate of Newstart in order to pump more money into the economy and lift the retail sector.
It is instead relying on recently passed tax cuts and the Reserve Bank of Australia’s recent moves to drop the cash rate to a record low one per cent.
“The big question right now with interest rate cuts in place and tax cuts coming is whether policy makers have done enough to keep the Australian economic story on an even keel,” Mr Blythe said.
The new monthly report combines near real-time spending readings from CBA’s household transactions data with Google Trends search information.
Meanwhile, the CBA has also made it less attractive for savers to hold onto their money, cutting the interest rate on Netbank savings accounts by 0.15 per cent, and others by 0.25 per cent.
RateCity research director Sally Tindall said the cuts are another blow for savers.
“CBA cut the majority of its variable home loan rates by just 0.19 per cent so it’s disappointing to see some cuts to savings accounts have gone above this,” she said.