Jarden analyst Ben Gilbert says it appears that some part of the stage 3 tax cut proceeds appear to have been spent by households, but “maybe not as much as we would have expected or hoped”.

“We saw spending pick up a little through July and August, but not materially. Some of the categories that we might have seen a bit of a bounce, such as in fast food, have not seen an uptick,” he says.

Overall, the picture emerging is that households remain pretty tight with their cash.

Gilbert points to the weaker performance at KFC operators Collins Foods and the owner of Dan Murphy’s, Endeavour Group.

Importantly, it’s not a case of weakness across the board. Gilbert says that in general terms, the tax cuts probably affected spending patterns differently across different age groups.

For older generations living off their super, the tax cuts would have had a pretty small impact, in many cases. Families with big mortgages would often have received substantial savings from the tax cuts, but equally, many of them may have needed to use the cash to get their finances in order, rather than to increase their spending. Younger shoppers may have spent a bit more of the tax cuts, he says, pointing to decent results at youth-focused retailer Universal Store and electronics powerhouse JB Hi-Fi.

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It is still early days since those tax cuts arrived, and spending may yet pick up over Black Friday and in the lead-up to Christmas.

Overall, however, the picture emerging is that households remain pretty tight with their cash. That’s important because household spending accounts for about 60 per cent of all economic activity, and most economists expect this spending to rebound this half, as inflation cools. If that spending recovery is weak, it would flow into softer economic growth.

As far as the Reserve Bank is concerned, weaker growth should helpful bring inflation down back towards the central bank’s target range of 2 to 3 per cent. That’s because the Reserve’s basic problem is demand (spending) is outstripping supply (the economy’s capacity to create enough goods and services to meet that spending), leading to inflation.

So, if households generally choose not to lift spending much, even after tax cuts, that should make it easier to get demand and supply back in balance.

To be sure, many economists still doubt Reserve Bank rate cuts are coming soon, despite the US Federal Reserve’s historic 0.5 percentage point cut this week. Surprisingly strong jobs data this week – unemployment was unchanged at 4.2 per cent in August – made many economists more confident that the Reserve Bank probably won’t cut rates this year.

All the same, the cautious consumer response to this year’s tax cuts should reassure the Reserve Bank that consumers have well and truly got the message about tightening spending.

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