Businesses feeling the impact as consumers stop consuming

Households significantly cut back on their spending during the 2023 calendar year, Australian Bureau of Statistics data has confirmed.
 
Inflation increased 4.1% during 2023, but household spending increased only 2.3% during the same period, which means the average household made fewer purchases.
 
Household spending varied markedly from state to state, rising faster than inflation in Western Australia and the Northern Territory (both 4.5%), but slower in South Australia (2.8%), Victoria (2.4%), Tasmania (1.9%), New South Wales (1.8%), Queensland (1.6%) and the ACT (0.8%).
The concern for businesses is that real household disposable income was actually negative (-1.5%) at the end of 2023, due to elevated inflation and interest rates.
 
However, as the cost-of-living situation improves, real household disposable income is expected to return to positive territory soon, reaching 2.5% in December 2024 and 3.5% in December 2025, according to Reserve Bank forecasts. If and when that happens, household consumption should rebound.