Westpac senior economist Satish Ranchhod said overall a calmer start to 2022 was expected after the big jump at the end of last year, following the easing of Covid restrictions and the Omicron effect.
“This comes after a strong end to 2021 and what we’re really seeing here is spending remaining resilient as we head into the new year.
“But as we look forward to the next few months, we are very aware that spending will be pressured by various factors, in particular the cost of living pressure.”
But Ranchhod pointed out that part of the drop in sales volumes for the March quarter could be attributed to shrinking household budgets, and there will be a further hit to spending with the Reserve’s planned rate hikes. Bank.
“We think these big interest rate hikes from the Reserve Bank are really going to squeeze household budgets. They are facing pressure in terms of debt service charges [and] they also see the housing market cooling off fairly quickly.
“The combination of these factors [is going to slow] household spending over the coming year and that will be a big drag on overall economic activity.”
Ranchhod said slowing economic activity was the central bank’s goal, as current inflation was largely fueled by strong domestic demand.
“They really need to calm down what’s happened in the household sector if they want to get inflation under control,” he said.