Household spending increases in June, powered by EV sales

Spending by Australian households increased by 0.8% in June, driven by the sale of new cars, particularly electric and hybrid models, as fuel prices rose due to the ongoing conflict in Iran. The Australian Bureau of Statistics (ABS) reported that this spending surge was mainly due to a 3% increase in transport expenditures. Electric vehicle sales have surged, accounting for an increasing share of new vehicle sales, as households adjust their spending habits in response to higher fuel costs.

The surge in transport spending has now returned to pre-war levels, following a 4.4% decline in April. Household spending, excluding transport, grew by a moderate 0.3% in June, with a third of consumption categories experiencing declines. The rise in recreation and culture spending was largely due to categories such as electronic goods, performing arts, live entertainment, and gambling activities, potentially fueled by major sporting events.

Among the states and territories, all eight reported an increase in spending, with Tasmania (+1.6%), ACT (+1.4%), and Western Australia (+1.3%) showing the largest gains. Despite this overall boost in household spending, the Commonwealth Bank of Australia anticipates a softening trend in the coming months, especially with housing prices declining rapidly.

However, this moderate increase in spending may not prompt the Reserve Bank of Australia (RBA) to raise interest rates further, as the bank has already increased rates to 4.35% this year to combat inflation.