Australian households have drastically slashed their spending on luxury goods as they grapple with the twin impacts of high inflation and spiralling interest rates, new data from the National Retail Association has revealed.

The NRA’s quarterly economic outlook report revealed growth in discretionary spending was close to zero in NSW, and similar in Qld and Victoria, representing a significant decrease in real terms when inflation is taken into account.

Nationally, discretionary spending increased just 2.2 per cent in March, even after factoring in higher prices.

“It is important to watch this metric for discretionary spend; it will be a clear signal of households’ ability to continue spending in a rising-rate, inflationary economic environment,” the report says.

It also found:

  • Strong increases in spending on essential items, although this is largely due to the price impact of higher inflation;
  • Credit cards are the fastest-growing form of payment, with growth above 18 per cent, revealing consumers’ tightening cash flows; and
  • A 27 per cent decrease in retail job vacancies for the quarter.

NRA Chief Executive Officer Greg Griffith said the figures were further proof of the very difficult financial circumstances confronting Australian households, and vindication of the cost-of-living measures delivered in last week’s Federal Budget.

“There’s no doubt the cost of living continues to hurt Australian households and retail businesses with this quarter reflecting a distinct change in how households are spending.

“Discretionary spending is slowing right down and revealing a transition as inflation and interest rates settle in and take effect.

“It’s essential that we continue to monitor discretionary spend as it is a clear sign of consumers’ ability to spend amidst a rising-rate, inflationary economic environment,” Mr Griffith said.

NRA’s Economic Outlook Report is available on request.

The National Retail Association is the voice of modern retail, representing more than 60,000 stores across Australia. It has been serving businesses in the retail and fast-food sectors for close to 100 years.

For more information, please contact the NRA media unit at marketing@nra.net.au or 1800 RETAIL (738 245).