-- Australian household spending surged in March at its quickest pace in two years, driven by soaring oil prices from the Middle East conflict.
Seasonally adjusted household spending climbed 1.6% month on month, a sharp acceleration from the previous month's 0.3% uptick, although slightly below the 1.8% growth forecast by markets, according to data from the Australian Bureau of Statistics on Tuesday.
"Household spending rose strongly in March, driven by a 5.1% rise in transport costs as fuel prices climbed in response to the conflict in the Middle East," ABS head of business statistics Tom Lay said.
Fuel costs peaked in late March after conflict in Iran disrupted global oil markets, particularly through the closure of the Strait of Hormuz.
This surge also pushed up public transit usage as commuters avoided driving private vehicles, while food spending rose 1.7% due to consumers stockpiling goods over supply chain fears.
Commonwealth Bank senior economist Ashwin Clarke noted that higher fuel costs should trigger an easing in spending growth later this year.
"We do expect a further easing in spending growth over the course of the year," Clarke said. "The expected slowing in household consumption is needed for the economy to slow and move closer to balance."
ANZ analysts shared the cautious outlook, with economist Aaron Luk and head of Australian economics Adam Boyton saying that "Despite a relatively solid outcome for the first quarter of the year, we continue to anticipate a softer pace of spending growth ahead."
Some analysts believe the central bank has room to combat inflation because household spending has remained resilient despite the oil shock.
Capital Economics said the Reserve Bank of Australia will have no "major qualms about tightening policy further," as household spending is "holding up well in the face of the oil price shock", Bloomberg News reported.
The RBA on Tuesday raised the official cash rate by 25 basis points to 4.35% amid higher inflation, reacting to inflationary pressures stoked by the Iran conflict.