- Market participants are seeking value by locking in 2-5 year term deposits upwards of 5.00%.
- The longer investments represent a good opportunity to gain a expected real return as inflation and the cash rate lowers over the next 1-2 years.
- This sentiment is also reflected in the fixed income space with market participants favouring longer fixed securities when able to.
- NCD margins have settled with +45 the level to roll funds in the domestic space.
CBA Household Spending
- The CBA Household Spending Index looks at all household spending done through CBA.
- Consumer spending accounts for 50% of the economy and the CBA index captures 30% of all Australian consumer transactions.
- The theme of sticky services inflation continues with spending in education increasing by 2.8% MoM in August and insurance also coming in hot.
- The inflow of international students contributed to this data point.
- An increased population may continue to drive up services demand and fuel tightness in the labour market.
- Although household good were up for the month, this is just a slight reversal of the recent downturn.
- Recreation spending was resilient, however this may be treated as an outlier, with the Matildas World Cup efforts driving increased activity.
- Overall the current pace of spending growth is lower than inflation and implies a fall in real terms.
- This level will be good news to the RBA and does not warrant any changes to the current cash rate.