Angus Livingston, AAP National Economics Writer
(Australian Associated Press)
Income tax cuts have failed to get Aussies spending on retail, as economic growth slows to the lowest level in a decade.
Consumers are keeping their wallets closed, in part because successive interest rate cuts have them worried about the state of the economy.
The Commonwealth Bank’s Household Spending Intentions recorded a fall in September, after a rise in August sparked some hope.
“While there were some positive signs in sectors where the tax refunds now flowing would most likely be spent, the overall picture is one of continued consumer caution,” chief economist Michael Blythe said on Tuesday.
The NAB’s Consumer Anxiety Index painted a similar picture, as Australians chose to save or pay down debt rather than spend.
“When we ask Australian consumers what worries them, the cost of living is consistently at the top of their list,” NAB chief economist Alan Oster said.
The Reserve Bank on Tuesday said year-end growth had slowed to 1.4 per cent, the lowest outcome in a decade, despite interest rates being cut to record lows three times since June.
Mr Blythe said the pullback in retail spending intentions could be a signal that interest rate cuts are blunting the impact of income tax refunds.
“Our view for some time now is that monetary policy changes do little to support household activity,” he said.
“While a positive ‘wealth effect’ is emerging from rising home prices, consumers interpret rate cuts from record lows as a sign of economic weakness and keep their wallets shut.”
Labor shadow treasurer Jim Chalmers said the Reserve Bank had confirmed what the government refused to acknowledge.
“Australia’s economic growth is the lowest in a decade, wages are stagnant, and employment is fragile,” he said.
But Prime Minister Scott Morrison said Australia’s economic growth is the second-highest compared to the G7 nations.
“Today there are more people who are employed as a share of Australia’s total population than at any other time in Australia’s history,” he told parliament.
“Only the Labor Party could find a problem with that.”
The Reserve Bank noted growth in household disposable income has been subdued.
“Consistent with the ongoing low growth in household disposable income, household consumption had increased by only 1.4 per cent over the year to the end of June,” the RBA said.
“Members noted that there had not yet been evidence of a pick-up in household spending following the recent reductions in the cash rate and receipt of the tax offset payments, although they acknowledged that it may be too early to expect any signs of a pick-up.”
The NAB research found about 60 per cent of Australians said electricity, gas, water and groceries added most to their cost-of-living expenses over the past three months.
It also found any improvements in incomes are in part being funnelled into paying down debt.