After being squeezed by cost of living pressures for months on end, there are early signs cash-strapped households are starting to feel slightly more confident about the economy.
According to Westpac's Card Tracker Index, which tracks millions of card transactions processed by the bank every day, households took advantage of this year's Black Friday sales.
Sales of discretionary goods were up solidly, with real growth in discretionary spending per person around the country — the first time that has happened in three years.
Economists say it may be a sign that pressures are easing slightly for households as the end of the year approaches, but more data will be needed to confirm the trend.
"It's fairly broad-based across the discretionary goods categories as well," Westpac's Matthew Hassan said of the late-November sales.
"Electrical items, clothing, and online all going pretty strongly.
"At last some positive signs that those [stage 3] tax cuts are starting to flow.
"It looks like consumers were holding back until the discount windows came through."
The card-tracking data complements other data showing household spending on non-essential goods hit its highest rate in 10 months in October.
It is early days, but there are signs households have started to spend their tax cuts. (AAP: Bianca De Marchi)
Sporting events, concerts, airfares, drive spending
According to figures released by the Australian Bureau of Statistics (ABS) on Thursday, household spending rose by 0.8 per cent in October, marking a turnaround from a 0.2 per cent decline in September.
They showed spending increased across all categories in October, with the rebound in growth being driven by more people purchasing discretionary items — specifically tickets for major sporting events and music concerts, and airfares.
It was the largest increase to the monthly household spending rate overall since January.
The ABS data in question was a new experimental data series called the Monthly Household Spending Indicator, which is derived using bank transactions, supermarket transactions and new vehicle sales data.
It followed the ABS's more traditional retail sales figures on Monday, which showed a stronger-than-usual month for October retail sales as retailers enticed buyers to start spending early ahead of the Black Friday sales with heavy discounting.
Importantly, the uptick in household spending in October (ABS data) and the increase in discretionary spending in November (Westpac card tracker), sit in stark contrast to other data from this week.
On Wednesday, when the ABS published its September quarter GDP figures, the data showed household consumption was flat across July, August and September.
It showed Australian households experienced a significant increase in "living standards" in the September quarter, attributed to the federal government's stage 3 tax cuts and energy rebates which lifted households' disposable incomes.
But that increase in living standards had not yet not flowed through into extra household spending in the September quarter, according to the data.
AMP economist My Bui said the level of household spending in October was above expectations, and re-affirmed strong retail sales figures seen in the same month.
"Both sets of data showed that household spending in Australia has probably bottomed, with October discretionary purchases starting to pick up slightly (after 2 years of cutting back)," she said.
"This rebound is also consistent with recent consumer sentiment surveys that showed a slightly less negative level of spending intention ahead of the holidays."
Shoppers are beginning to feel less pessimistic ahead of the festive season. (AAP: Bianca De Marchi)
The curious case of air travel
While ABS figures show households spent more on air travel in October — resulting in the monthly spending figure coming in at a 10-month high — airfares remain high.
The ACCC's latest Domestic Airline Competition report, released last month, found that domestic airfares between capital cities had increased by 13.3 per cent on average between July and September.
The competition watchdog attributed the increase to Rex Airlines being placed into voluntary administration, which reduced the number of domestic services to major cities.
Flight Centre CEO Graham Turner said a lack of competition in the domestic aviation market was keeping prices high, and travellers were paying more as a result.
"Domestic airfares are still pretty high. They haven't really come down over the last 12 months and it can be quite hard to get seats, particularly over the busy period," he told The Business.
"Both major domestic airlines, Virgin and Qantas, have about 2 per cent less seats than they did 12 months ago, and that's why the prices generally are staying up quite high domestically."
However, he said it was unlikely that a deal between Virgin Australia and Qatar Airways — green-lit by the ACCC in November — would result in lower domestic airfares in the coming months.
"We think in the longer run, it will impact positively on domestic airfares, positively for the consumers anyway," he said.
Graham Turner says a lack of competition is keeping domestic airfares higher. (ABC: Thomas Pawson)
Mr Turner however noted that international airfares were becoming cheaper. But he said not all households could take advantage of them.
"The international airfares [are] probably a bit better," he said.
"We're getting more capacity in and fares have come down over 10 per cent over the last 12 months to most major destinations.
"The under 40s, families and younger people are struggling with that cost of living, and that is affecting their travel — not only domestically, but internationally as well.
"On the other hand, the Baby Boomers, the over 50s, who are pretty comfortable with their savings and their assets, it's still going very strongly."
That trend was separately identified by investment bank Morgan Stanley, which has seen rising demand for premium airfares, and suggested they were becoming "the new luxury good".
The bank's Sydney-based equity strategist, Simon Clark, said that shift was being driven by increasingly affluent consumers whose household wealth has been increasing — "led in particular by the 'Baby Boomer' demographic".
"This is a growing bracket which is increasingly choosing 'experiences' such as premium and luxury travel," Mr Clark wrote.
Early spending signs from Black Friday
The October household spending data from the ABS did not include the impact of the recent Black Friday sales period, which was forecast to see consumers spend almost $7 billion in four days last month.
However, figures from NAB suggest households have taken advantage of the Black Friday sales — which were being held earlier than usual to encourage shoppers to spend in the lead-up to the festive season.
Data from the bank's merchants show overall spending during the Black Friday sales was 4 per cent higher compared to 2023, while the number of transactions was 4 per cent lower.
The bank suggested it showed a preference for quality over quantity, however it may also indicate the financial pressure households are under, with interest rates remaining at 4.35 per cent and unlikely to be cut until mid-2025.
"It's a little too early to say that stage 3 tax cuts are the primary driver but there are several factors at play," NAB's Julie Rynski said.
"Some of these include consumers making more thoughtful spending decisions and wanting to take advantage of deals while they contend with the cost of living."
Ms Rynski said businesses were wanting to take advantage of a "well-publicised sales" weekend, which might have influenced spending decisions.
But Westpac's Matthew Hassan noted that there were "a couple of caveats".
"Last year, and the year prior, we saw consumers heavily target these discounted sales windows, with activity dropping off very sharply outside of these events, so we'll need to track how things perform outside of the Black Friday window," he said.
"The other caveat is that outside of the discretionary goods space, the discretionary services spend has softened somewhat over the last few weeks, and the overall pulse, in terms of quarterly growth momentum in card activity, has actually faded a little bit.
"So it will be quite important to see how that discretionary goods picture follows through until year-end.
"But with this improvement from late November, it's looking a little bit more promising [heading] into the December quarter."