Households are spending more on discretionary items, yet that confidence hasn't trickled through to the property markets yet, with buyers remaining firmly in wait-and-see mode.
On Tuesday, the Reserve Bank of Australia (RBA) opted to hold the official cash rate (OCR) at 4.35%, saying it wanted more evidence of how the previous three rate hikes were filtering through the economy before making any more moves on monetary policy.
Yet signs of consumer resilience are already emerging. Despite elevated interest rates, persistent inflation and ongoing cost-of-living pressures, household spending edged higher in May. According to Commonwealth Bank of Australia's (CBA) CommBank Household Spending Insights series, spending rose 0.2% month-on-month, reversing a 1.2% decline in April.
"It comes down to what they are spending more on," Andrew Rennie, a Melbourne-based broker at Helping Hands Finance, told Australian Broker. "Are they spending more on groceries and fuel and insurance and things like that? If that's the case, then that's not a surprise because everything's going up in price."
But the data paints a different picture. Growth was driven by discretionary categories, not essentials. Spending increased across recreation, hospitality, household services, communications and digital, health, and food and beverage, while utilities, insurance, transport and education all declined.
Belinda Allen, head of Australian economics at Commonwealth Bank of Australia (CBA), said a number of events, including Australia's annual State of Origin rugby league series, helped lift spending on recreation and hospitality over the month.
Yet stronger consumer spending has not translated into greater confidence in the property markets. Brokers on the ground say buyers remain hesitant to take on major long-term financial commitments, suggesting households are still willing to spend day to day, but remain cautious about the broader economic outlook.
"What we are seeing in the market right now is a lack of confidence to make decisions. And the reason why there's a lack of confidence to make decisions is because there's not enough clarity around what the rules are going to be," said Marissa Schulze, founder and director at Adelaide-based Rise High Financial Solutions, referring to the recently proposed tax changes to the federal budget.
"People are concerned that these changes are going to impact property values in a negative way. And that's a huge concern for young people who have bought property in the last five years using the government's first-time home deposit scheme," the broker continued. "They could potentially end up in a position of negative equity where they will actually owe more money to the bank than what their property is worth, which will put them in a really difficult financial position.
"So I think at the moment we're seeing a lot of people sitting and waiting and holding and just wondering what's going to happen and not wanting to act on decisions because there's too much uncertainty," Schulze added. "And I think that will continue until the legislation is finalised and we know exactly what the new laws are going to look like."
Adam Bradley, founder and director at Brisbane-based Emerge Finance, agreed many borrowers are sitting on the sidelines.
"It reminds me of post-COVID-19," he said. "Everyone wasn't sure what was happening with COVID; people weren't making decisions. It reminds me of that. We've had a lot less inquiries over the last probably four to eight weeks.
"I think everyone's tightening the purse strings," Bradley continued, explaining that the caution extends beyond the property market. He noted that contacts in discretionary industries, such as hospitality, have reported softer trading conditions and are increasingly looking for new ways to attract customers.
"People who have never needed to market before, but their business is now quieter. So they're looking at other avenues to market to try and increase patronage," Bradley said. "I just don't think there's much positive news happening at the moment."
