The media release accompanying the Reserve Bank of Australia’s (RBA) recent interest rate decision noted that “growth in private demand has strengthened substantially more than expected, driven by both household spending and investment”.
The RBA’s Statement of Monetary Policy (SoMP) also noted that “the pick-up in consumer durables inflation was stronger than expected in the November Statement and coincided with stronger household spending growth”.
Given that household consumption is the largest component (around 50%) of the Australian economy, the rise in spending recorded over the December quarter was one reason the RBA board chose to lift the official cash rate by 0.25%.
