Invest
The return of the wealth effect
The wealth effect is returning to Australia, with home buying intentions on the improve, according to new analysis.
The return of the wealth effect
The wealth effect is returning to Australia, with home buying intentions on the improve, according to new analysis.
Monthly data from the Commonwealth Bank Household Spending Intentions (HSI) series has pointed to early signs “suggesting a positive wealth effect is starting to re-emerge”.
Michael Blythe, the bank’s chief economist, noted some early signs of the “wealth effect” – including spending on motor vehicles, travel and entertainment.
The wealth effect is a change in consumer spending that usually accompanies a change in an individual’s perception of their own wealth.
If they feel wealthier, their spending habits will reflect this.
Home buying household spending intentions mean the pick-up in dwelling prices seen for the second half of 2019 will continue into the first half of 2020, said Mr Blythe.
Construction
It comes as the residential construction downturn approaches its bottom.
“Past cycles show that leading indicators like building approvals turn about three months after home buying intentions start to lift,” according to the economist.
In addition, “a bottoming in the construction cycle would remove a major growth drag on the economy, and also helps retailing”.
Motor vehicles
While buying intentions for motor vehicles were still “soft” overall in December, Mr Blythe said the slow improvement over recent months was able to accelerate sharply on the latest readings.
It’s significant “because RBA research has revealed that the form of spending most sensitive to changes in wealth is motor vehicles”, the economist highlighted.
“A positive wealth effect could help other forms of spending as well,” according to Mr Blythe.
Travel and entertainment
In December, travel spending intentions also continued to trend higher, with Mr Blythe noting that entertainment spending intentions are “improving at a respectable pace”.
Retail
Despite this, retail household spending intentions were down through December, and households remained very cautious about spending on a retail level.
It’s an outcome Mr Blythe has called “disappointing” relative to “the stimulus applied via interest rate cuts, tax rebates and the upturn in dwelling prices”.
“The zig-zag pattern for the retail HSI indicates that the Black Friday event brought forward spending from December into November without necessarily boosting spending overall,” the economist explained.
About the author
About the author
Spending
Where are Aussies looking to spend their money in 2021?
Australians are increasing their spending intentions, with travel and entertainment set to be the big winners, a new report has revealed. ...Read more
Spending
Toyota returns $18m in JobKeeper payments
An unexpected surge in sales in 2020 has inspired car manufacturer Toyota to write an $18 million check to the government, returning the amount it received in JobKeeper subsidies and touting the move...Read more
Spending
Aussies spend up big during pre-Christmas sales
Consumers have taken advantage of new freedoms post-lockdown and pre-Christmas discounts as retail sales soared in November, official figures have revealed. ...Read more
Spending
Aussies unlikely to splash the cash following pandemic
Australian consumers are likely to cut back on discretionary items in 2021 with many re-evaluating their spending habits following the COVID-19 pandemic, new research has revealed. ...Read more
Spending
‘It’s back’: SA unveils second Great State Voucher
South Australian residences or those planning to travel to the state could save up to $150 as the government continues its support for the local tourism sector. ...Read more
Spending
Rise in health premiums at 20-year low, but there’s a catch
While the Australian government’s health insurance reforms have resulted in the lowest annual average premium change since 2001, according to experts consumers could still see a “whacking” prem...Read more
Spending
Young Aussies pressured to buy love this Christmas
Younger Australians are likely to spend more this Christmas as they equate expensive gifts with love, a researcher has found. ...Read more
Spending
Buying local this Christmas could raise over $1bn for small business
New research suggests that Australians could deliver an estimated $1.12 billion to the small-business sector this Christmas just by buying one more gift from their favourite local business. ...Read more
Spending
Where are Aussies looking to spend their money in 2021?
Australians are increasing their spending intentions, with travel and entertainment set to be the big winners, a new report has revealed. ...Read more
Spending
Toyota returns $18m in JobKeeper payments
An unexpected surge in sales in 2020 has inspired car manufacturer Toyota to write an $18 million check to the government, returning the amount it received in JobKeeper subsidies and touting the move...Read more
Spending
Aussies spend up big during pre-Christmas sales
Consumers have taken advantage of new freedoms post-lockdown and pre-Christmas discounts as retail sales soared in November, official figures have revealed. ...Read more
Spending
Aussies unlikely to splash the cash following pandemic
Australian consumers are likely to cut back on discretionary items in 2021 with many re-evaluating their spending habits following the COVID-19 pandemic, new research has revealed. ...Read more
Spending
‘It’s back’: SA unveils second Great State Voucher
South Australian residences or those planning to travel to the state could save up to $150 as the government continues its support for the local tourism sector. ...Read more
Spending
Rise in health premiums at 20-year low, but there’s a catch
While the Australian government’s health insurance reforms have resulted in the lowest annual average premium change since 2001, according to experts consumers could still see a “whacking” prem...Read more
Spending
Young Aussies pressured to buy love this Christmas
Younger Australians are likely to spend more this Christmas as they equate expensive gifts with love, a researcher has found. ...Read more
Spending
Buying local this Christmas could raise over $1bn for small business
New research suggests that Australians could deliver an estimated $1.12 billion to the small-business sector this Christmas just by buying one more gift from their favourite local business. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
