Rising interest rates and high inflation has started to hit the hip pockets of consumers, with new data showing people are cutting back on spending, including buying homes.
The latest CommBank Household Spending Intentions (HSI) Index fell 0.5 per cent to 114.9 in September down from 115.5 a month earlier.
During September, consumers started cutting back on health and fitness costs, household services, as well as transport.
Health and fitness spending declined sharply by 11.2 per cent in September, with fewer visits to doctors and dentists.
The Home Buying Intentions Index was also down 4.4 per cent this month and 24.6 per cent for the year, with increased interest rates slowing demand for home loans.
CommBank Chief Economist Stephen Halmarick said households were finding that higher interest rates were leaving them with less money to spend on discretionary items.
“The effect of rising interest rates is beginning to impact on household budgets and Australian consumer spending is adjusting accordingly,” Mr Halmarick said.
“Households are seeing a noticeable difference in their mortgage repayments and therefore are considering how they can adjust their expenses elsewhere.”
Home buying intentions are now down 24.6 per cent compared to last year, according to CBA.
The number of home loan applications was lower in September, both relative to August 2022 and September 2021, while Google searches related to home buying were also lower on the month.
One area that saw an increase was motor vehicle spending rose, rising 6 per cent in September, following a strong 14 per cent gain in August.
Spending on motor vehicles is now up 3.3 per cent for the year, moving into positive territory for the first time since March.
“The gains in the motor vehicle index provides some relief for the industry, as global supply chain issues begin to resolve,” Mr Halmarick said.
“The improvement follows the strength seen in August, with additional deliveries of vehicles coming into Australia.
“Meanwhile, transport spending has reduced, yet we can expect an increase in the coming months as petrol prices rise as the government’s excise levy returns to its full amount.”
The HSI index for September is up 14.1 per cent compared to the prior year, but given that in September last year much of the east coast of Australia was in lockdown this relative strength should come as no surprise CBA said.
This annual increase is, however, down from the August rise of 15.2 per cent on an annual basis.
In more bad news for consumers and homeowners, CBA’s economics team has forecast a further 25 basis point rise at the Reserve Bank of Australia’s November board meeting, before holding to assess the lagged impact of rate rises on the Australian economy.
CBA expects to see a peak-to-trough decline in property prices of 15 per cent on a national level in this cycle, driven by the higher cost of borrowing.