Australia’s consumer exuberance won’t last

The strong rebound in consumer spending in November is consistent with our view that GDP surpassed its pre-lockdown peak in Q4 already. And while the Omicron tsunami seems to have resulted in a renewed slowdown in consumption, mounting staff shortages and disruptions to goods supply will result in continued strong increases in consumer prices. The upshot is that we still expect the RBA to end its bond purchases in three weeks, though the sluggishness in wage growth means we don’t expect the first rate hike until early next year.