Spending levels increase in June, figures show

Mozo

Friday 20 July 2012

Aussies continued to loosen the grip on their purses and wallets last month and spent money more freely.

Spending levels increase in June, figures show

This is according to the latest Commonwealth Bank of Australia (CBA) business sales indicator, which was up by 2.5 per cent in seasonally-adjusted terms in June.

The barometer tracks credit and debit card transactions made through CBA systems and is said to represent around one-third of the nation's total spend.

It is a good yardstick by which to assess spending patterns and it shows that people are still willing to part with their money, although it is clear that Aussies are not splashing the cash anywhere near as frivolously as they were before the global economic downturn.

Some experts believe the recent reduction in interest rates was a major factor in this upturn in retail activity.

Although the Reserve Bank of Australia (RBA) opted not to lower rates earlier this month, it has slashed the national cash rate by 125 points since the start of November 2011.

Chief economist at CommSec Craig James said: "It appears the stimulus provided by the RBA's back-to-back rate cuts and the Federal Government's household assistance package, has provided a sizeable boost to economy-wide spending.

"The improvement in household budgets has enticed consumers to spend more freely and businesses across an array of sectors have benefited."

It seems that the RBA rate reductions provided a real sense of relief among Australians and they have been very quick to take advantage of the situation.

Not only have households been spending more on products and services, but the CBA also revealed recently that homeowners are paying off their mortgages far more quickly.

However, spending patterns might start to plateau, as the minutes from the latest RBA meeting suggested that it may be a while before the cash rate falls from its current level of 3.5 per cent. The board members stated that they are happy with the existing rates and they are adopting a "wait and see" approach before taking any more action.

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