After major events, it's back to basics for stretched households

The CommBank household spending intentions index, which tracks the expenditure of around 7 million customers, fell 1 per cent in October as the amount going on eating out, concert tickets, hotel rooms, airfares and other entertainment-related purchases fell, contributing to an overall 3.7 per cent decline in discretionary purchases.

Instead, families directed more of their funds to paying for electricity and gas, covering soaring insurance premiums and education expenses and forking out at the bowser.

CBA chief economist Stephen Halmarick said the index showed "a clear tightening" in consuming spending last month.

Mr Halmarick said expenditure had declined in seven of the 12 spending categories included in the index, and where spending had increased it had been driven by higher prices, including a 12 per cent jump in insurance expenditure in the past year, an 8.9 per cent lift in education expenses, a 7.5 per cent rise the amount going on utility bills and 7.7 per cent increase in health charges.

Westpac reported a similar trend among its customers, with the weight of their spending showing signs of swinging from discretionary goods and services towards essentials.

Westpac senior economist Matthew Hassan said spending activity was losing momentum, with the Westpac card tracker index dropping 6 points to 133 points since mid-September.

Mr Hassan said the data suggested the " consumer narrative is shifting quickly" from the strength observed during the September quarter, and should be closely tracked given the most recent rate rise and forthcoming sales events.

The results show that even before the latest interest rate hike, households were pulling back on their spending.

Reserve Bank of Australia acting assistant governor Marion Kohler on Monday acknowledged that growth in consumer expenditure had become "subdued...as cost of living pressures, higher interest rates and higher tax payable all weigh on disposable incomes for a time".

Despite this, there is speculation that ongoing Reserve Bank concerns about the outlook for services inflation could prompt it to tighten monetary policy even further.

But Mr Halmarick said his base case was for no more rate hikes.

"We are clearly seeing the flow on effects of the interest rate increases from earlier in the year," the CBA economist said. "Last week's decision from the RBA to raise the case rate by a further 25 basis points, to 4.35 per cent, is likely to add further downward pressure to household spending over coming months."

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There is expected to be a limited rebound in consumer spending this month as shoppers look to take advantage of Black Friday sales and similar discounting.

But Mr Halmarick said experience from recent years showed that a surge in spending this month was followed by weaker retail sales in December, evidence that discounting mostly affected when people spent, rather than how much.

But Deutsche Bank chief economist Phil O'Donaghoe said Norway's struggles to lower inflation should be salutory for the Reserve Bank and added to the case for a further rate hike next month.

Mr O'Donaghoe said that, like Australia, Norway had a high incidence of borrowers with variable rate mortgages and had tightened monetary policy by 4.25 percentage points (but in its case it started in September 2021).

Despite this, inflation was continuing to exceed expectations and the Norwegian central bank was widely tipped to hike again to 4.5 per cent next month. The Deutsche Bank economist said the RBA should do the same.