The National Accounts for the June 2022 quarter paints a strong picture of the  Australian consumer. Despite fears about higher interest rates, the prevailing climate is one where incomes are growing faster and savings are being drawn down gradually. We expect the strength of income and savings to outweigh the headwinds for at least another six months. It is fair to caution that once the slowdown arrives around mid-2023, it could be a protracted downturn.

Australian national accounts show that the consumer still has a preference for retail spending, even as government stimulus unwinds.  Household incomes rose 4% and spending was up 7% in the March 2022 quarter. Savings are still high at 11% of income, compared with a pre COVID level of 7%. We also thought it was interesting that the recovery in non-retail spending in the quarter was not at the expense of retail spending. Compared with the US and UK, we expect a longer-dated slowdown in retail spending that timestamps the risk for 2023, not 2022.