BUDGET 24-25: what will consumers do?

The key question in the wake of the 2024 Australian federal budget is how consumers will react to the suite of cost-of-living measures announced, according to ANZ’s Head of Australian Economics Adam Boyton - and the answer could influence the Reserve Bank of Australia’s view on rates.

Speaking on an ANZ customer call the morning after the budget was announced, Boyton said the key takeaway for the budget he was “wrestling with” was if households would keep, or use, the money they’ll receive from measures such electricity bill relief and stage-three tax cuts.

“How much of that the household spends and how much of that the households save?” he said. “And how much room does that leave the Reserve Bank to cut rates by the end of the year?

“I'm expecting households will save a reasonable share of that, and that will provide some room for the RBA to start easing towards the very end of this year.”

Boyton made the comments alongside Mahjabeen Zaman, Head of FX Research at ANZ. The call was hosted by Simone Tilley, ANZ’s Head of Corporate Institutional.

Unpack

Zaman said there was “a lot to unpack” from the budget, but agreed the near-term focus would be “unfolding cost-of-living drivers over the next few months, which will clearly have an impact on inflation, spending, confidence and the rest”, she said.

Longer term initiatives, such as the Future Made in Australia agenda, will have extended implications on Australia's growth outlook, Zaman said.

“Bottom line, there are various industries that will look to benefit from this in the small and medium businesses space,” she told the call.

Measures

Boyton said none of the measures announced in the budget had impacted ANZ Research’s expectations around growth, interest rates or the RBA’s decision. ANZ Research still expects the central bank to loosen monetary policy in November.

Short-term consumer confidence figures will be watched closely, Boyton said, particularly “when the stage-three tax cuts land”.

“Consumer confidence in the ANZ-Roy Morgan weekly measure is sitting at its lows for this year,” he said. “If that remains the case when we move into July and August, I think consumers are likely to save a bit more of the… cost-of-living relief than I might have otherwise thought.”

That lowers the risk of further growth in inflation, Boyton said.

“If anything, I’m reasonably comfortable we'll still see lower inflation over the next 12 months,” he said.