Australia’s consumer spending recovery is gaining momentum, according to UBS economist Stephen Wu. Household expenditure rose 4.8 per cent year-on-year in June, marking the fastest pace of growth since January 2024. This positive trend has led UBS to reconsider its consumption forecasts for the second quarter.
Wu stated that the Monthly Household Spending Indicator suggests that downside risks to the forecast for Q2 real consumption are unlikely to materialise. UBS now sees some upside risk to its Q2 consumption forecast, estimating growth of 0.4 per cent quarter-on-quarter. The available data, covering approximately two-thirds of total consumption, indicates that household spending will contribute around 0.25 percentage points to the GDP growth for the quarter, according to UBS estimates.
While monthly growth slowed to 0.5 per cent in June, a decline in spending on alcohol, tobacco, and dining out was balanced by increased demand for household goods and recreational activities. The three-month trend remains robust at 1 per cent. UBS is a global financial services firm providing investment banking, wealth management, and asset management services to private, corporate, and institutional clients. They offer financial advice and solutions to clients worldwide.
Despite the positive spending data, UBS still anticipates the Reserve Bank of Australia (RBA) will cut the cash rate by 25 basis points in August, citing recent inflation data confirming moderating price pressures. Wu suggests that the improving household spending picture and easing inflation support a gradual approach to monetary easing, with a final 25 basis point cut forecast for November. UBS’s base case remains a 3.35 per cent cash rate by the end of 2025, with a potential for one further cut in February 2026.
