Australians have growing concerns over government policies in an election year, but a 1.8 per cent drop in consumer spending in December could reinforce the case for a Reserve Bank of Australia rate cut, the Commonwealth Bank says.
The decline was largely because of financially-stretched households bringing forward holiday spending to Black Friday and Cyber Monday sales in search of a bargain, CBA chief economist Stephen Halmarick said.
The bank's household spending insights index recorded a 7.7 per cent drop in discretionary spending, reinforcing the view Australian consumers continue to struggle.
Shoppers brought forward holiday spending to take advantage of Black Friday sales, insights reveal. (Bianca De Marchi/AAP PHOTOS)
"When those sales periods are not there, things really drop away quite quickly," Mr Halmarick told AAP.
"Overall, consumer spending remains pretty subdued."
The bank's index gleans spending insights from the de-identified payments data of about seven million retail customers.
Rises in essential categories such as utilities, insurance and transport were outweighed by a steep drop in spending on household goods, which plunged 8.3 per cent.
Combined with falling inflation, the pullback in spending bolstered CBA's view the central bank would cut interest rates at its next meeting in February, Mr Halmarick said.
It's no longer an outlier opinion among the big four banks. ANZ recently brought forward its rate cut prediction to February on the back of lower-than-expected inflation figures for November.
Cost-of-living pressures have been blamed for subdued spending in December. (Jono Searle/AAP PHOTOS)
NAB's consumer stress index rose from 57.6 to 58.5 in the December quarter, as cost-of-living pressures continued to mount.
Almost 20 per cent of consumers reported "very high" stress levels, although the index was still down from the same time last year.
Households had growing concerns over the impact of government policies on future spending and savings plans with Australians set to head to the polls by May 17.
"While elections rarely have widespread impacts on consumer behaviours, sentiment can be buoyed once there is greater clarity around the policies of each party and an eventual outcome," NAB economists Dean Pearson and Robert De Iure said.
Rate cuts should provide further room for an uplift in sentiment as more Australians feel household pressures easing, they said.
The government has helped to ease inflationary pressures, Treasurer Jim Chalmers argued, with low and middle income earners especially benefiting from higher wages growth.
Households are banking on an interest rate cut in February to help ease pressure on budgets. (Bianca De Marchi/AAP PHOTOS)
Analysis released by the government on Wednesday showed Australians earning less than $54,000 had pre-tax pay grow at an average rate of 6.2 per cent since June 2022 - almost double the increase felt by the highest income earners.
Changes to workplace laws and stage three tax cuts, which were opposed by the coalition, helped lift wages growth above levels seen at any point during its nine years in power, Dr Chalmers said.
"The choice at the next election is between a Labor government which has been creating jobs, getting wages moving again and rolling out cost-of-living help versus a coalition that wants Australians working longer for less."
Opposition Leader Peter Dutton hit out at the government for failing to prevent steep rises in electricity, insurance and wages costs, which were hobbling small business owners.
"There are just too many Australians who are really struggling to keep their head above water," he told reporters while touring fire-affected communities in Victoria's Grampians region.
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