Fuel Costs Drives 2.9% Sharp Rise in Australian Household Spending
Synopsis
Australian household spending saw a significant lift in March, rising 2.9 per cent as the Middle East conflict drove petrol prices up by 45 per cent. According to CBA data, transport costs were the main driver, alongside increased spending on utilities and major sporting events. Older Australians over 65 are currently leading spending growth as they benefit from higher interest rates on savings. However, economists warn that rising costs are forcing many others to switch to public transport as disposable incomes begin to weaken.
Australian households forked out more cash in March with the Middle East war pushing petrol prices higher. According to data from the Commonwealth Bank (CBA), while everyone is feeling the pinch, older Australians are holding a bigger party.
Key Highlights
- CBA data showed household spending grew 2.9% in March.
- Spending at petrol stations surged by around 45% in just a single month.
- The over-65s spent 14.2% more than in the same period last year.
- Australians also spent more on power and health insurance in March.
- The Reserve Bank will digest these numbers ahead of its next interest rate meeting on May 5.
Rising Petrol Prices And Major Events Boost Spending
Australian families spent more freely in March, largely due to skyrocketing fuel prices. Transport costs soared by almost 23% as the Middle East conflict pushed up oil prices worldwide. But this change was not fueled only by petrol. Busy occasions such as the start of the AFL and NRL seasons, the Formula 1 Grand Prix, and the Women’s Asia Cup prompted consumers to spend more on dining out and entertainment.
At the same time, basic living expenses also increased. Households paid 6.9% more for utilities such as electricity after government rebates were withdrawn. So did many people who rushed to pay their health insurance bills early to beat the price increases that took effect on April 1. Although people are spending more at the moment, experts at CBA predict this will slow in the coming months as families have less spare cash.
But Older Australians Are Leading in Spending
There is, however, a clear trend: older Australians are spending significantly more than younger Australians. The increase was disproportionately high among those over 65, whose spending rose by more than 14%, much greater than in any other age cohort. Older people are far less likely to have mortgages than younger families, so higher interest rates on savings actually help retirees at the expense of working-age households struggling against rent and huge home loans.
Shift Toward Public Transport
Fuel prices are already at record highs, and many Australians are beginning to change how they get around. More Australians are opting to use public transport instead of driving their own car, according to new data from Westpac Bank. Economists call this a natural response to scarcity, when something like petrol becomes very costly, people devise ways to use less of it. This shift in behaviour is precisely what experts hope will eventually help rein in inflation.
FAQs
- Who pays more the young or the older generation?
That shift is being led by people 65 and older. They are spending 14.2 per cent more than they did a year ago.
- Are people still driving as much?
Banks are seeing a trend of individuals switching to trains and buses to avoid the high cost of filling their cars.
- Are we going to see interest rates adjusted soon?
On May 5, the Reserve Bank will examine this spending data in determining whether ongoing high interest rates are necessary to curb inflation.
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