Interestingly, one of the few categories in which Australians spent less in June was food.
While Lowe noted that consumer spending was high on his watch list to determine the extent to which the RBA would raise rates, the central bank will also look at many other factors to balance that decision.
The job market is an important input. And ANZ job listing data provides even more fodder for the RBA to keep up the pressure on interest rates. An increase of 1.4% month-on-month exceeds the March maximum and confirms that we remain in a particularly tight labor market.
RBA Governor Philip Lowe says a 0.75 percentage point rise in interest rates “is not on the table.”
The city’s new game predicts what the RBA will offer in August. Lowe has already predicted that inflation will peak at 7% in December, well ahead of its target range of 2 to 3%. So there is a lot of work to be done.
Undoubtedly, consumers are sending conflicting signals about how they are responding to rising interest rates.
Despite the depletion of June spending, consumer sentiment has been especially mild over the past two months. Survey responses to questions about inflation, the respondent’s financial future, and willingness to buy an important item for the home have been weak.
June may have been the last blow to heavy consumer spending before portfolios closed. This is certainly something that the RBA will monitor closely.
Consumer spending and labor market indicators may be slow to respond to tighter monetary policy, but the housing market is doing a lot of heavy work. Domestic house prices have fallen over the past two months since the RBA began raising rates, especially in Sydney and Melbourne.
All the signs of a cooling housing market are now showing, the most egregious of which is that auction settlement rates have fallen to a two-year low.
Although the spectrum of economists is expected that in the next 18 months the values of residential properties will fall by 15 to 20 percent, sensitivity to rising interest rates is somewhat mitigated in firstly because of the huge set of savings that Australians have and secondly because many borrowers used the money saved during COVID to get ahead of the interest payment schedule.
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