By Lucinda Jerogin, Associate Economist at CBA
- It was a quiet week domestically with the ABS Monthly Household Spending Indicator surprised to the downside, rising by 0.5% in June to be 4.8% higher annually. Australia’s goods trade balance printed at $5.4bn in June.
- Offshore, the BoE cut the bank rate by 25bp to 4.0% as expected. US tariff news continued to make headlines.
- The week ahead will see the RBA hand down its August Monetary Policy Decision. We expect a 25bp cut to 3.60%.
- The Labour Force Survey, Wage Price Index, Q2 25 lending indicators and CBA Household Spending Insights are also due.
- Abroad, the economic calendar is lighter. US CPI and UK GDP data are scheduled.
It was a quieter week for global financial markets. Locally, analysts’ attention was on the release of the ABS Monthly Household Spending Indicator (MHSI) and goods trade balance. The MHSI printed slightly weaker than expected on Tuesday, rising by 0.5% in June (CBA: +1.0%/mth) to be 4.8% higher annually.
On a quarterly basis in nominal terms, spending increased by 1.0%/qtr. This was slightly below our CommBank HSI spending data that pointed to a 1.4% quarterly lift.
We had been flagging that the official data was running a little weaker than ours recently, but this gap has closed in recent months. In real terms, the volume of household spending increased by a sold 0.7%/qtr in Q2 25, up from 0.5%/qtr in Q1 25.
In totality, the available data (including our internal data) suggests that spending momentum in Australia appears to be improving, albeit at a slower pace than we anticipated at the beginning of the year.
The CommBank Monthly Household Spending Indicator will be one to watch next week (due 15/08) to monitor the evolution of the consumer recovery.
In addition to the MHSI, the ABS released the goods trade balance for June. The data surprised to the upside, printing at $5.4bn, well up from $1.6bn in May.
The trade balance has jumped around in 2025. A high of $6.0bn was reached in March on strong non-monetary gold exports to the US. The low was in May on weak commodity exports.
In the quarter, the goods trade balance narrowed to $11.2bn from $13.0bn in Q125. A narrowing goods trade balance, and a services deficit has meant Australia has been recording a current account deficit since Q2 23. This looks set to continue in the foreseeable future as export values fade on lower commodity prices.
The slow consumer recovery and still elevated investment pipeline continues to support import growth.
Offshore this week, the Bank of England (BoE) cut the bank rate by 25bp to 4.0%, as widely expected. However, the decision was split among policymakers, and it took an unprecedented second vote to break the deadlock to form a majority in favour of a 25bp cut.
Governor Bailey’s post-meeting comments raised uncertainty about the timing of additional cuts. Our international economics team next expects the BoE to cut the bank rate in November.
Elsewhere this week, US trade news continued to make headlines. President Trump imposed an additional 25% tariff on imports from India (taking the total to 50%) to take effect later this month because of its purchases of Russian energy. The President also threatened to impose sectoral tariffs on semiconductor and pharmaceutical imports ‘within the next week or so.’
Turning our attention to the week ahead and all eyes will be on the RBA’s Monetary Policy Board decision. We expect the Board to cut the cash rate by 25bp to 3.60% in a straightforward decision. It has been just five weeks since the shock on hold July meeting and the data flow has largely evolved as expected.
The all-important Q2 25 CPI data has come and gone and confirmed the disinflation impulse in the Australian economy continued in the June quarter.
The other key piece of data was the June labour force release. This was a soft report, and the average unemployment rate came in line with the RBA’s forecasts from May at 4.2% in Q2.
The Board should continue their cautious easing cycle in August. We see a consensus decision to cut the cash rate this month. If the data evolves as expected a follow up rate cut should be delivered in November.
However, we anticipate the RBA to act cautiously as they approach their estimate of neutral and uncertainty rises about how restrictive (if at all) policy is.
In terms of the data flow next week, the Labour Force Survey, Wage Price Index, and Q2 25 lending indicators are due.
We expect wage growth to print at 0.8% qtr and 3.3%/yr and the unemployment rate to remain unchanged at 4.3%.
The CommBank Monthly Household Spending Indicator and the NAB Business Survey will also be released.
Abroad, markets will continue to face US trade announcements. US CPI, UK GDP and UK labour market data are also due.
