Home buying, education and health and fitness spending intentions rose in May, reflecting the growing confidence and optimism of Australian consumers as the economic recovery turns into an economic expansion, according to the latest Commonwealth Bank Household Spending Intentions (HSI) series report.
“Together with the strong labour market and positive wealth effects from rising dwelling prices, we expect consumer spending to support Australia’s economic growth in 2021,” said Belinda Allen, senior economist at CBA.
Home buying intentions were stronger than May 2020 levels as both the number of mortgage applications and Google searches increased as residential property prices continued to march higher.
“The high reading is no surprise given the strength in the housing market,” Ms Allen said, adding that CBA forecasts home prices to rise 14 per cent over 2021 and 2022. “Home prices continue to lift, supported by low interest rates and the return of property investors to the market.”
Meanwhile, education spending intentions extended their recovery in May, with the number of education spending transactions up from both May 2020 and May 2019. However, the value of education spending was still below May 2019 levels, even as last month’s data posted a strong improvement to May 2020 figures.
“Despite the recent improvement, we’re seeing the lasting impact of Covid travel restrictions and international border closures on Australia’s education sector, particularly universities,” Ms Allen said.
Health and fitness spending intentions rose strongly in May 2021 relative to May 2020 as Australian households resumed spending on medical services.
“Compared to May 2020 we are seeing more spend on the type of routine, preventative health care such as dentist and orthodontist visits, medical laboratory testing and optometrists. Many of these services were shut during the lockdown period and many people simply put this type of care on hold last year,” Ms Allen said.
Still, the May HSI data continue to bear the impact of last year’s Australia-wide coronavirus lockdown and subsequent reopening of the economy.
Base effects, whereby comparisons to last year’s figures have a distortive impact on this year’s trend, were particularly evident in the retail category, where household spending intentions appeared to cool in May 2021 from April 2021, reflecting the impact of the economy reopening in May 2020. While the overall retail category was stronger this year when compared to May 2020, when compared to May 2019 there are areas of weakness such as dry cleaning and laundry services, door-to-door sales and duty free stores.
“Part of that is the lasting impact of working from home, as we don’t need to dry clean as much anymore,” Ms Allen said.
Travel spending intentions, meanwhile, remain significantly elevated to year-ago levels when almost all travel was shut down but continue to track lower than 2019, reflecting the lasting impact of the closure of international borders.
The HSI series offers a forward-looking view by analysing actual customer behaviour from CBA’s transactions data, along with household spending search activity from Google Trends. This combination adds to insights on prospective household spending trends in the Australian economy.
Each month, analysis by CBA’s Global Economic and Markets Research team provides an early indication of spending trends across seven key household sectors in Australia. In addition to home buying, the series covers around 55 per cent of Australia’s total consumer spend across; retail, travel, education, entertainment, motor vehicles, and health and fitness.