Australian consumer spending held steady in August, undershooting forecasts

The unchanged reading gives traders only a modest reason to wonder about the distance left in the RBA's tightening path, rather than whether it moves today, so the response is apt to show up in November rate expectations and the wording of the statement. Weaker demand at home coexists uneasily with the central bank's inflation concerns, yet supports the case that the hiking cycle is close to concluding. Fuel prices, pushed up by the Iran war, are lifting some components in nominal terms, leaving oil as a key variable for both spending and inflation.

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Earlier:

• ING cuts year-end AUD/USD target to 0.72 but sees an RBA hike blocking a retest of June lows

• NAB sees RBA hike supporting AUD near term, but the medium-term risk points the other way

• RBA preview: 25bp hike to 4.60% widely expected as sticky inflation lingers

• Sticky core inflation pushes RBA towards its highest cash rate since 2011
• RBA preview: A 25 bps rate hike is priced in, but what comes after that?
• All four major Australian banks now forecast RBA hike to 4.60% on September 29
• RBA governor Bullock flags inflation risks as higher neutral rates come into focus
• RBA's Bullock says supply shocks hard for policy to manage, flags second round risk
• RBA's Hunter says rates may need to rise again as inflation risks stay tilted higher

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Summary

• Australian household spending was unchanged in August (0.0% month on month), missing a 0.4% forecast and following a 1.1% rise in July.
• The annual pace slowed to 6.8% from 7.0%.
• Just three of the nine categories increased: transport (+2.3%), hotels, cafes and restaurants (+0.8%) and miscellaneous (+0.3%). Recreation and culture dropped 1.4%, while clothing and footwear, as well as alcohol and tobacco, each declined 1.0%.
• Goods spending rose 0.3% and services fell 0.3%. Discretionary outlays slipped 0.3%, while non-discretionary spending gained 0.6%.
• New South Wales and Queensland each rose 0.3%, while the ACT, Tasmania, Victoria and Western Australia all recorded falls.
• The data are in current prices and unadjusted for inflation. They emerged hours before the RBA is widely expected to set the cash rate at 4.60%.

Australian Bureau of Statistics data showed household spending went nowhere in August, falling short of the 0.4% gain forecast by economists. That follows a 1.1% surge in July, while the annual rate eased to 6.8% from 7.0%.

Beneath the headline, the breakdown was uneven. Just three of the nine categories moved higher: transport climbed 2.3%, hotels, cafes and restaurants advanced 0.8%, and miscellaneous spending increased 0.3%. Recreation and culture suffered the steepest drop at 1.4%, and clothing and footwear, as well as alcohol and tobacco, each fell 1.0%.

Goods outlays ticked up 0.3%, supported by motoring goods and vehicle purchases, while services dropped 0.3% as recreation and cultural services, health services, and personal care softened. Discretionary spending eased 0.3%; non-discretionary spending advanced 0.6%, driven by motoring goods and rail and road transport.

Across the states, New South Wales and Queensland both gained 0.3%, while South Australia and the Northern Territory recorded 0.1% increases. The ACT and Tasmania were down 0.5%, Victoria fell 0.4%, and Western Australia edged 0.2% lower.

Because the ABS numbers are expressed in current prices and have not been inflation-adjusted, rising fuel and other goods costs flatter the overall figure. The measure combines bank card transactions, supermarket data and new vehicle sales, and is benchmarked against household consumption in the national accounts.

The timing is significant. The Reserve Bank of Australia is due to announce at 2:30pm AEST, followed by Governor Michele Bullock's 3:30pm press conference. A move to 4.60% — the fourth hike of 2026 and the most elevated cash rate since November 2011 — is widely expected. A Reuters survey found 33 of 34 economists expecting an increase, along with all four major banks.

A single unchanged month within a volatile series probably won't alter the decision today. The implications are more apt to emerge in November pricing and in the language of the RBA's statement. NAB has made the case that the central bank could end its tightening and begin cutting ahead of its G10 counterparts; CBA, meanwhile, has suggested a September-quarter trimmed mean inflation figure of 1% or above could prompt a November move.

Market participants will scan the RBA's statement and press conference for hints about the path ahead, with September-quarter inflation figures and retail sales numbers next on the agenda.