‘Tightening of belts’: End of fuel tax relief to put brakes on spending

The impending end of the fuel tax relief could potentially put the brakes on consumer spending, as home improvement retailers including Bunnings say shoppers are shifting their focus on value to stretch their budgets.

Treasurer Jim Chalmers said this week that the end of the 22 cent discount on the fuel excise next week, which was put in place by the former Morrison government, should not result in an immediate jump in petrol prices.

However, market watchers have raised concerns that even a small uptick in fuel prices could tip some budgets over the edge, especially in low and medium-income households.

UBS analysts said this week that while the increase to fuel prices would only be modest, higher petrol prices are very effective in souring consumer mindsets once they start flowing through.

“While a modest share of spending, it is a deemed ‘grudge’ purchase with the price frequently observed such that it could impact overall spending. We fear a slowdown in spending from November 2022 onwards, with the fuel excise [and] cumulative impact of the rising cost of living,” retail analyst Shaun Cousins wrote in a note to clients this week.

Spending data and company earnings reports have shown Australians have kept shopping over the past few months, but a UBS survey of consumers in the last week of August showed a split forming between high and low-income earners, with those on low and middle incomes reducing their intention to spend on things like home improvement.

Retailers in the DIY and home goods sectors agree that consumers are paying much closer attention to the individual price of products.

“Being an everyday, low price retailer is more important than ever at the moment,” Bunnings chief operating officer Simon McDowell said.

He said the hardware giant was focused on offering the widest range of products to give customers options at multiple price points,