Households have drastically cut back on non-essential spending in recent months, according to a new report from Commonwealth Bank that lays bare the differing fortunes of renters and homeowners.
The nation's biggest bank says household spending in April was 1 per cent lower than in March and had only increased by 2.6 per cent over the previous 12 months – comfortably lower than inflation, which currently sits at 3.6 per cent.
While spending on the likes of utilities and car expenses was up, the overall drop was led by significant cutbacks across all discretionary categories, according to CBA's Household Spending Index (HSI).
"The April HSI paints a picture of a constrained consumer following an early Easter bump in March," CBA chief economist Stephen Halmarick said.
"Significantly, the annual rate of household spending has fallen from 3.9 per cent in March to 2.6 per cent in April, led by a large drop-off in discretionary spending, which is down 4.4 per cent in the month."
For the first time, the index looked at how the spending of renters, mortgage holders and outright homeowners compared.
Renters were found to have cut back the most, while spending among people who own their home without a mortgage was found to have increased far faster than inflation.
"We can see from the new home ownership insights included in this month's report that renters in particular have cut back, with spending just inching higher at 1.3 per cent over the year," Halmarick said.
"Those who own their home outright experienced the strongest spending growth at 6.3 per cent annually."
The most difficult places in Australia to find a rental
Halmarick said the spending slowdown is set to continue for the rest of the year, leading to a probable interest rates cut in November.
"We expect weak consumer spending and below-trend economic growth to continue throughout 2024, and despite recent inflation data surprising to the upside, we anticipate the RBA will cut interest rates in November this year," he said.
