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Matthew Hassan, Research Analyst at Westpac, explains that the March quarter was a disappointing one for the Australian consumer as the spending came in well below expectations, rising just 0.3%, and while annual growth remains respectable at 2.9%yr, the on-again-off-again quarterly profile continues to question the underlying momentum to demand.

Key Quotes

“On incomes, the latest data was more mixed than weak. Nominal labour income posted a solid 1.1% rise in the March quarter with upward revisions lifting annual growth to 5.1%yr, the fastest pace since mid-2012.”

“Broader estimates of household income were also on the weak side in the March quarter. Real disposable income for example, which includes non labour earnings, nets out tax and interest payments and adjusts for inflation, posted a weak 0.2% gain to be up 1.1%yr.”

“Recent developments around household balance sheets add another risk to the outlook: savings rates could even rise.”

“On balance it suggests we could see some lift in savings and an extra headwind to consumption growth.”