Spending patterns starting to normalise

  • By Zilla Efrat

The latest CommBank Household Spending Intentions (HSI) Index shows the normalising of spending patterns post COVID-19 as Australians fork out on travel and entertainment.

However, the index fell by 3.8 per cent to 112.3 in April – after reaching a record high in March –because of declines in several categories that increased during lockdowns.

Home buying spending fell by 21.5 per cent after gains in February and March, and is 13.1 per cent lower than in April last year. Health and fitness spending fell by 14 per cent, but is still up 2.9 per cent year on year. Transport spending fell by 8.6 per cent largely due to the reduction in the petrol excise and lower fuel costs, but remains 13.5 per cent higher over the year.

Travel spending reached a new record high in April and exceeds its pre-COVID-19 peak, gaining 10.6 per cent during the month and 41 per cent on April 2021. Spending on travel agents, airlines, cruise ships, tourist attractions, hotels and motels and bus lines all increased, with a decline in camper and RV rentals reflecting changing travel patterns with the reopening of state and international borders.

Entertainment spending rose by 6 per cent in April led by increased activity in record stores, concerts and theatre alongside eating and drinking out, but remains 1.8 per cent lower year on year. Retail spending rose by 0.3 per cent – a strong reading with April normally a seasonally weak month.  

CBA senior economist, Belinda Allen, says the seasonal volatility of April data due to additional public holidays meant that year on year movements better reflected the state of the economy, with the CBA HSI Index up by 5 per cent on April last year.

“With an interest rate hiking cycle now underway the Australian economy is in a strong position. We are seeing a post-COVID normalisation of consumer spending patterns, with lower spending on categories that increased during lockdowns like health and fitness, while higher travel and entertainment spending reflects more people being out and about.

“We expect a fairly shallow hiking cycle, with further interest rate hikes in June, July, August and November 2022 and one final hike in February 2023 taking the cash rate to 1.60 per cent. Going forward, it will be important to watch discretionary spending categories like home buying, motor vehicles, retail and entertainment to judge the impact of interest rate rises.

“Households have accrued a very high level of savings during COVID, the labour market remains tight and wages growth is accelerating. These factors will assist families with higher mortgage repayments over coming months.”

The CBA HSI Index combines analysis of CBA payments data (Australia’s largest consumer spending data set covering around 40 per cent of payment transactions), loan application information and Google Trends publicly available search activity data.