Households open their wallets as an August rate cut looms in Australia

The monthly household spending indicator (MHSI) rose 0.5% m/m in June, building on a 1% m/m surge in May. The jump in June was driven by food, vehicle and electronics purchases, spurred by end-of-financial-year discounting.

• The MHSI suggests consumer spending was stronger in Q2 than the signal received from the narrower retail sales measure; retail sales volumes declined in Q2, but the measure including services increased 0.7% q/q, and 0.3% q/q in per capita terms.

• The Q2 MHSI suggests household spending growth has picked up a little. But, per capita growth is still subdued. Coupled with a softening labour market and easing inflation, we still expect the RBA to cut the cash rate at the August meeting, with another cut likely in Q4.

Chart 1: Household spending jumps again in June