Australian households are suffering their longest recession in generations.
The Q4 national accounts, released in March, revealed that real per capita household consumption fell for an eighth consecutive quarter.
A steep decline in household incomes is behind the fall in consumption.
As illustrated below, real per capita household consumption had declined by around 8% from its mid-2022 peak as of Q4 2024.
On Friday, the Australian Bureau of Statistics (ABS) released Q1 data on retail sales. In volume terms, retail spending was flat after sales events supported spending in Q4 2024.
Commenting on the result, CBA economist Harry Ottley noted:
“The strength in Q4 24raised questions about how much momentum the consumer had heading into 2025—especially given improved real incomes from tax cuts and lower inflation”…
“Our internal spending data has since then continued to suggest that consumers are fairly cautious to start 2025. We had flagged much of the strength in some segments of the consumer basket in Q4 2024 was likely overstated by large sales events. Today’s data aligns with that view”…
“Furthermore, this week we released our Q125CBA Household Indicators data, which again suggests consumers are preferring to save rather than spend”.
Adjusting for population growth, real per capita retail sales in Australia declined in Q1 2025 and unwound the rebounds in Q3 and Q4 2024.
As illustrated below by Justin Fabo from Antipodean Macro, real per capita retail sales have fallen heavily since mid-2022, alongside the record decline in household incomes.
Judging by the latest retail sales data, the recession continues for Australian households.
