Australia household spending jumps as fuel spike drives EV surge

AUSTRALIA’S household spending surged beyond estimates in June as consumers accelerated a shift to electric vehicles in response to persistently elevated fuel prices.

Spending jumped 0.8 per cent from the prior month, four times stronger than economists’ estimate of a 0.2 per cent rise, Australian Bureau of Statistics data showed on Tuesday (Aug 4). From a year earlier, it climbed 6 per cent, also outpacing forecasts.

“Electric vehicle sales increased significantly over the year and have continued that trend in June, accounting for a growing share of overall new vehicles sales as households adjust their spending behaviour in response to rising fuel prices,” said Tom Lay, head of business statistics at the ABS. 

The Australian dollar and yields on policy-sensitive three-year government notes advanced after the release.

The result underscores the Reserve Bank’s assessment that a slump in consumer sentiment isn’t passing through to household outlays.

The RBA, which meets next week, increased interest rates at its first three meetings of the year to try to cool demand and rein in inflation, which has held stubbornly above the top of its 2-3 per cent target band.

The spending data was reinforced by a separate report showing job advertisements in July rose 0.8 per cent from the prior month and were up 2.1 per cent from a year earlier.

Recent data showed inflation was softer than anticipated last quarter, while the jobless rate has remained relatively low as hiring strengthened. At the same time, the housing market is deteriorating in response to higher borrowing costs and tax changes that have hit demand for homes. 

The RBA kept rates unchanged at 4.35 per cent in June, and is expected to stand pat again at its Aug 10-11 policy meeting. 

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Household consumption accounts for more than half of Australia’s output, making the data an important input into RBA deliberations. 

New vehicle sales were the standout within the Transport segment, driving a 3 per cent rise.

Recreation and culture spending rose 1.4 per cent in June, with households spending more on electronic goods, performing arts and other live entertainment, while gambling activity was likely supported by major sporting events.

Alcoholic beverages and tobacco increased 1 per cent in the month. BLOOMBERG