Household spending soared in March, as rising petrol prices smashed Australians’ budgets.
New data released by Commonwealth Bank on Thursday shows household spending jumped 2.9 per cent in March, in large part due to rising fuel costs.
According to the big four bank, the bulk of this spending spree was on transportation costs which surged 22.9 per cent in the month of March alone.
Taking out rising fuel costs, spending would have risen by 1 per cent over the month of March, compared to a 0.4 per cent in February.
Spending in all 12 categories tracked was up for the month of March.
Commonwealth Bank head of Australian economics Belinda Allen said more than half of the increase in consumer spending was simply higher cost of living.
“As expected, the sharp March lift in household spending reflects higher petrol prices as a result of the conflict in the Middle East,” Ms Allen said.
“Spending at petrol stations accounts for well over half of the category, with spending up around 45 per cent in the month.”
The conflict between the US/Israel and Iran which started at the end of February has led to the blockage of the Strait of Hormuz, a critical waterway where one-fifth of the world’s oil once passed daily.
Before the conflict in the Middle East started six weeks ago, oil prices were roughly $US56 ($A80) a barrel, before trading around $US100 ($A143) a barrel.
For every $10 increase in the price of oil, Australians pay an extra 10 cents at the fuel pump.
Ms Allen also said regional Australians were spending more money than those in the cities in most states and territories.
“While higher fuel prices initially lifted spending, regional areas are more exposed to prolonged increases given the heavy reliance of agricultural, mining and freight industries on diesel-intensive operations,” she said.
Older Aussies spending more for the first time
The data also showed a stark generational divide has emerged in Australian spending habits, with older Australians increasing their consumption, while younger people are tightening their belts.
According to the figures, those aged 65-plus are leading the spending charge, followed by those aged 55 to 64 and 45 to 54.
Younger Australians, particularly those aged between 25 to 34, are being left behind as they slow down their consumer spending.
Ms Allen said older Australians were being helped by back-to-back rate hikes in February and March, taking the official cash rate to 4.10 per cent.
“Typically, households aged 65 and over have higher disposable incomes and are more likely to benefit from higher interest rates compared with other age groups,” Ms Allen said.
