Income tax cuts haven’t made enough of a difference to get Aussies spending on retail, with interest rate cuts instead making them cautious with their wallets.
The Commonwealth Bank’s Household Spending Intentions recorded another drop in September, after a rise the previous month sparked some hope.
“While there were some positive signs in sectors where the tax refunds now flowing would most likely be spent, the overall picture is one of continued consumer caution,” chief economist Michael Blythe said on Tuesday.
The NAB Consumer Anxiety Index also rose over the September quarter, with worries over health expenses, government policy and the ability to fund retirement rising the most.
“When we ask Australian consumers what worries them, the cost of living is consistently at the top of their list,” NAB chief economist Alan Oster said.
Mr Blythe said the pullback in retail spending intentions was potentially a sign interest rate cuts are blunting some of the stimulus from income tax refunds.
“Our view for some time now is that monetary policy changes do little to support household activity,” he said.
“While a positive ‘wealth effect’ is emerging from rising home prices, consumers interpret rate cuts from record lows as a sign of economic weakness and keep their wallets shut.”
Interest rates have been cut to record lows three times this year, dropping to 0.75 per cent, while Treasurer Josh Frydenberg has been relying on income tax cuts to pump more money into the economy.
The Reserve Bank on Tuesday released the reasons behind its most recent cut, noting growth in household disposable income has been subdued.
“Consistent with the ongoing low growth in household disposable income, household consumption had increased by only 1.4 per cent over the year to the end of June,” the RBA said.
“Members noted that there had not yet been evidence of a pick-up in household spending following the recent reductions in the cash rate and receipt of the tax offset payments, although they acknowledged that it may be too early to expect any signs of a pick-up.”
The NAB research found about 60 per cent of Australians said electricity, gas, water and groceries added most to their cost of living expenses over the past three months.
The CBA research, which tracks actual Commonwealth Bank transactions and household spending intentions from Google Trends searches, found the housing market continues to rebound.
The NAB found that despite reporting a modest improvement in their incomes over the past three months, many Aussies are still struggling to save.
Almost twice as many women in net terms saw their savings fall than men, and they were also less optimistic than men about their ability to save in the future.
The NAB found any improvements in incomes are in part being funnelled into paying down debt and this is expected to continue over the next 12 months.