Australian economy talked up by Jim Chalmers as consumers turn off appliances, forgo treats
More than 40 per cent said they had cancelled or reduced spending on food delivery and entertainment, coffees, snacks and lunches. People are also cutting expenditure on magazines, audiobooks, apps and gym memberships.
They may have to reduce spending even more if the Reserve Bank takes interest rates higher, with Westpac on Thursday saying the RBA is now likely to take the cash rate to 2.6 per cent by February next year.
On an $800,000 mortgage, a cash rate of 2.6 per cent would mean a $1200-per-month increase in repayments compared to before the RBA started tightening monetary policy.
Westpac chief economist Bill Evans said such an increase would be the most aggressive by the RBA since 1994.
“We accept that our forecasts for the cash rate assume a successful navigation of a very narrow path towards a soft landing,” he said.
“In particular, the risks that we have seen recently with large increases in wage settlements are unsettling. That is why it is so important for the RBA to be decisive in the early stages of the tightening cycle with that clear message that it is committed to containing inflation risks.”
While consumers struggle, businesses are continuing to deal with supply issues, including for workers.
An Australian Bureau of Statistics survey released on Thursday found half of all large and medium-sized businesses said they expected to increase wages and salaries over the next three months. Just 29 per cent of small operations are planning a pay increase for staff.
The strength of the jobs market is apparent with 57 per cent of large businesses and 52 per cent of medium-sized ones expecting to put on more staff. Retraining, increased hours and the rearrangement of job responsibilities are on the radar of many businesses.
Almost half of the surveyed firms reported an increase in operating expenses. In June last year, just 21 per cent were facing higher costs.
Businesses are continuing to struggle with supply chain issues, with 40 per cent – the highest level on record – reporting major problems.
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