The CommBank Household Spending Insights (HSI) Index saw a decline of 3.9% in December. This drop is attributed to interest rate rises and consumers’ holiday spending. The HSI Index, which is based on de-identified payment data from approximately seven million CommBank customers, representing around 30% of all Australian consumer transactions, saw a fall in eight of its 12 underlying categories.

The largest drop was seen in household goods (-16%), including furniture and household appliances. Other categories that saw declines include recreation (-6.5%), food and beverage (-2.7%), and hospitality (-0.8%). These falls were partly offset by increased spending on transport (+1.0%), insurance (+0.6%), and health (+0.2%).

CBA Senior Economist Belinda Allen stated, “Household budgets are undoubtedly constrained with rate rises leading to a weakening of consumer spending,”. She also noted that households in all states reduced spending in December, led by declines in Victoria, South Australia, and New South Wales.

Allen further added, “With the pace of economic growth in Australia moderating and the full impacts of November’s rate rise yet to flow through to the consumer, we expect a further slowdown in the pace of household spending over the coming months.” She also mentioned that inflation has moderated, supporting the view that the monetary policy tightening cycle has ended and that the RBA can start to lower interest rates in September this year.

CBA is forecasting the RBA will lower the cash rate by 75bp in the second half of 2024, starting in September, and a further 75bp in the first half of 2025.