Australia’s Economic Snapshot: Household Spending Decline Amid Financial Stress, Energy Sector Sees 12% Growth, Wages Lag Behind Inflation

Discretionary spending declines

Mounting financial stress is reducing the spending behaviour of households.

Growth in household spending has been rapidly declining since a peak in the middle of last year.

In June, discretionary household spending contracted for second month since the pandemic. Non-discretionary spending is still positive but tracking a few months behind it.

While the labour market remains strong, the effect of rising interest rates and high inflation is now pulling back household spending.

Turnover rose for energy providers

In June 2023, turnover fell in five of thirteen industries, with particularly heavy falls in accommodation and food services as the holiday period ended.

Eight industries experienced significant growth, led by the energy sector up by 12 % in June. The result was driven by the beginning of winter with higher energy prices.

Information, media, and telecom sector had the second-highest turnover with 4.6% increase. This was followed by other services and art and recreations 3.5% and 2.3% respectively.

WPI increased steadily

According to the Australian Bureau of Statistics, quarterly wage price index rose to 0.8% in June.

Conversely, the record high annual wage price index eased slightly from 3.7% to 3.6%.  However, it still remains at the level comparable to those which were observed in 2012.

Nominal wage growth is still roughly the half of level of inflation. “Real” wages – where wages growth exceeds inflation – is not expected to return until the first quarter of 2024.

Living cost strains employees, the most

Living costs rose 0.8–1.5 percent in the June quarter 2023. Employee households faced the largest increase of 9.6% annually. This is the highest record since the series started in 1999.

Rising mortgage interest rates had the greatest impact on employee household. Over the course of one year, interest costs on mortgages increased by 91.6%.

Broader factors, such as higher insurance premiums, food and housing, are the main contributors of the increased cost of living for all types of households.

Consistent average weekly earnings

New ABS data shows that full-time adult average weekly ordinary time earning was $ 1,838.10 for May 2023. Overall, it was increased by 3.9% on an annual basis.

Average weekly earnings in Australia have been steadily increasing over a decade. There was only one significant rise when the jobkeeper payments were initiated during the pandemic.

Despite labour national shortages since 2021, the average weekly total earnings have been surprisingly constant with the increase over the period.

Retailers exit industry

There were 2,589,873 operating businesses in Australia as of 30 June 2023. It was an increase of 0.8% in the number of businesses in 2022-2023.

Retail trade was the industry that experienced the highest net reduction in the number of businesses in 2022-2023 (A drop of 2,211 enterprises, bringing the total number to 155,755).

On the other hand, transport, postal service, and warehousing have seen an increase of 5,040 businesses, bringing the total number to 218,662.