The savings that fuelled Australia’s post-COVID splurge are running out. But will weak GDP and a slowing economy be enough to change the RBA’s mind on rates?
the most curious result out of the consumer sector
during the February reporting season was surely that of Domino’s Pizza Enterprises. With cost-of-living pressures mounting, you would think that struggling households would flock to the group, where large pizzas from its value range are as cheap as $5.99. Federal Treasurer Jim Chalmers and Reserve Bank governor Philip Lowe have much to chew on as they battle inflation and the cost-of-living squeeze on Australian families.after the group revealed its sales had been hit by the imposition of a new charge for delivery and some price rises, which were designed to help Domino’s protect its profit margins from inflationary pressures. The stock has kept falling, and is now down more than 34 per cent in the last month.
First, rising interest rates are biting hard on households. Household disposable income fell by 0.7 per cent in the December quarter, as a solid 2.5 per cent increase in wages and salaries was offset by more tax and more interest.The latter is, of course, the biggest problem. Total interest charged on mortgages surged by 23 per cent in the final three months of 2022.
Adjust the income picture for inflation and things look worse. According to Commonwealth Bank economist Gareth Aird, real household disposable income fell 2.4 per cent over the December quarter and is now down 5.4 per cent from its peak in the September quarter of 2021.Household consumption rose 0.3 per cent in the December quarter after rising 1 per cent in the September quarter. But interestingly, spending on discretionary goods actually outpaced spending on essential items .
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