The RBA has been given the green light to lift interest rates on Tuesday, as household spending increased in March.
Australian Bureau of Statistics data shows household spending jumped by 1.6 per cent in March thanks to rising oil prices due to the US-Iran war.
Transport spending soared by 5.1 per cent, as motorists paid more at the fuel bowser or made the switch to public transport, while food spending rose by 1.7 per cent due to precautionary stockpiling.
In the same period, hospitality spending slumped by 0.9 per cent as households tightened their budgets.
The increased figures follow on from last week’s inflation data, which jumped by 4.6 per cent in the 12 months to March. Transport prices surged by 8.9 per cent in the same period – the largest monthly increase on record.
Oxford Economics Australia lead economist Ben Udy forecasts further interest rate pain for Australian households due to “resilient spending”.
The RBA will announce its interest rate decision at 2.20pm on Tuesday. It is widely tipped to raise the cash rate by 25 basis points to 4.35 per cent.
“Household spending outside of fuel also rose despite higher fuel costs and earlier rate hikes eating into disposable income and weighing on consumer confidence,” Mr Udy said.
He pointed to non-discretionary spending, or spending on essential needs, which surged 3.4 per cent, although he noted discretionary spending also rose by 0.6 per cent.
He added the pressure on household budgets was “unlikely to ease” in the coming months.
Indeed APAC economist Callam Pickering said the strong household spending may result in slower growth for the rest of the year.
“The economic outlook is generally not as positive as it was even a few months ago. It’d be surprising if household spending growth didn’t slow considerably over the course of this year,” he said.
“Domestic demand is still outpacing supply, contributing to inflationary pressure.”
Prior to the release, Commonwealth Bank economists tipped consumer spending to rise by 2 per cent, following a 0.3 per cent lift in February.
