Australian households have slashed their spending on luxury goods amid rising inflation and interest rates, new data from the National Retail Association (NRA) has revealed.
The NRA quarterly economic outlook reported growth in discretionary spending was close to zero in New South Wales, with similar levels in Queensland and Victoria. The retail body noted this represented a significant decrease in real terms when inflation is factored in.
Discretionary spending increased just 2.2% in March nationally, even after factoring in higher prices, the report claimed.
“It is important to watch this metric for discretionary spend; it will be a clear signal of households’ ability to continue spending in a rising-rate, inflationary economic environment.”
The report also found that there were strong increases in spending on essential items, adding this is due to the price impact from inflation.
Credit cards are the fastest-growing form of payment, with growth above 18% - the NRA report noted this indicates that consumers are tightening cash flows.
There is also a 27% decrease in retail job vacancies for the quarter.
NRA CEO Greg Griffith said the figures were further proof of the difficult financial circumstances confronting Australian households, adding that it is a vindication of the cost-of-living measures delivered in last week’s Federal Budget.
“There’s no doubt the cost of living continues to hurt Australian households and retail businesses with this quarter reflecting a distinct change in how households are spending,” Griffith said.
“Discretionary spending is slowing right down and revealing a transition as inflation and interest rates settle in and take effect.
“It’s essential that we continue to monitor discretionary spend as it is a clear sign of consumers’ ability to spend amidst a rising-rate, inflationary economic environment.”