VIEW: Westpac Notes Stronger Consumption But “Smaller Buffers”

Australia’s Q1 national accounts showed a weak economy as expected but consumption including past quarters was stronger than expected but as a result the savings rate was revised down. GDP per capita fell 0.4% q/q to be 1% lower on the year. While household consumption surprised to the upside, Westpac believes “households have smaller buffers to support spending going forward”.

• “Household consumption grew 0.4% in the March quarter, up from Westpac’s expectation of 0.1%. Recreation and culture spend posted a slight 0.2%qtr rise, after four quarters of significant declines. The ABS noted a significant boost from events including the Taylor Swift concerts and Formula 1. The direct effect is worth about 0.15ppts on total consumption.”
• “The picture is of the various headwinds to income – from the rising cost-of-living, higher interest rates and higher tax payments – moderating but with only a muted recovery in incomes so far.”
• “New public demand grew by 0.6%qtr to reach 27.2% of GDP – a new record high, with the previous peak been 27.1% of GDP during the pandemic (Q3 2021).”