Households spend up on Matildas and education but cut back elsewhere as cost of living bites

Australian households are being stretched by the cost of living but still enjoyed a spending spree to celebrate the Matildas’ run at the recent World Cup on home soil.

Australians are pulling back spending everywhere they can, from eating out and clothing to plastic surgery and household goods, but they still want to have fun and went on a spending spree to enjoy the Matildas’ run at the FIFA Women’s World Cup.

Local concert tours also saw Australians open their wallets and spend on tickets, as elsewhere spending on health and hospitality dropped while on real terms – accounting for inflation – most categories were in decline.

The latest data from the Commonwealth Bank’s Household Spending Insights Index show the extent of the damage to consumer and household spending – which makes up 50 per cent of the Australian economy – done by 400 basis points of interest rate hikes by the Reserve Bank since last year.

The CBA tracker of household spending rose 0.7 per cent to 137 points in August, led by higher education spending by international students, higher transport spending due to increased petrol prices and elevated recreation activity related to World Cup. However, the annual change in the HSI was only up 2.3 per cent – a marked slowdown from growth of 8.3 per cent when the RBA began lifting rates and its peak growth rate of 18.7 per cent in August 2022.

The current growth rate in household and consumer spending, according to the CBA, of just 2.3 per cent is also well below the inflation rate, suggesting a fall in real terms.

Households are feeling the pains of stretched budgets due to the cost of living, higher interest rates and rent, as shown by the CBA’s analysis of payments from credit cards, debit cards and other transactions from its seven million customers, comprising roughly 30 per cent of Australian consumer transactions.

But one area Australians where let down their guards was the excitement through August for the Matildas run at the World Cup that saw a surge in ticketing sales as well as hundreds of thousands of fans swarming into pubs, hotels and other social gatherings to watch the tournament.

As a retail category, recreation spending rose 1.9 per cent in August and to 8.4 per cent on an annual basis due to the FIFA tournament and a number of big name concert tours, with ticketing agency spending up 70 per cent in the month. Recreation spending was also driven by online travel bookings, airlines, cruise lines and accommodation.

Spending on education rose strongly again, up 2.8 per cent for the month.

Queensland saw the strongest monthly spending growth during August (up 1.5 per cent), followed by Tasmania (up 1.3 per cent) and ACT (up 1.1 per cent), while annual spending growth remains strongest in Western Australia (up 4.7 per cent) and South Australia (up 4.5 per cent). Spending growth is weakest in Victoria and flat year on year, with only a small rise in spending in August (up 0.4 per cent).

CBA chief economist Stephen Halmarick said that annual spending growth measured by HSI Index remained subdued.

“The effects of 400 basis point of Reserve Bank of Australia interest rate rises is clearly reflected in a significant slowdown in annual household spending growth. We continue to expect household spending to weaken further.”