Australia’s national accounts showed soft real GDP growth of 0.8% for the September 2024 quarter.  While household income growth was strong, consumer spending was softer. Year-on-year nominal consumer spending rose 4.1%, or 0.4% in real terms, which is below long-term trends. Households lifted their savings in the September quarter with more than half the tax cuts saved. While spending was soft, the strength of income growth and stored up savings make us positive that retail sales growth will continue improving from here.

Australia’s national accounts reveals that income growth remains strong and consumers are spending more money outside of retail. For the March 2024 quarter, household income rose 5.1% and total consumer spending was up 5.9%, whereas retail spending only rose 2.5%. Households are saving very little of their income, a reflection of stored up savings from the past four years, but also a reminder that consumers will be more value conscious. We expect similar trends to constrain a retail recovery in FY25e as households allocate spending elsewhere and lower retail price inflation dampens overall revenue.