Spending takes a hit as household budgets stretched

Australians snapped their wallets shut after Easter, piling more pressure on a retail sector that has been struggling more than other parts of the economy.

Throughout April, spending fell sharply due to consumers forking out less on nice-to-haves, including meals out and recreation.

This followed a minor Easter-inspired bump in the March editions of the Commonwealth Bank indicator, which draws on its consumer transaction data.

The spending weakness underlines Treasurer Jim Chalmers' message that the economy is facing headwinds both at home and abroad as he fine-tunes spending plans over the coming year in his third budget on Tuesday.

CBA chief economist Stephen Halmarick said the weakness in consumer spending and below-trend economic growth should continue throughout 2024.

"Despite recent inflation data surprising to the upside, we anticipate the Reserve Bank of Australia will cut interest rates in November this year," Mr Halmarick said.

The weak consumer was behind sour conditions for retailers and other interest-rate sensitive sectors, as revealed in National Australia Bank's monthly survey for April.

Services sectors, such as finance, transport and recreation, and personal services were still faring pretty well.

Employment, trading and profitability - the three indicators of business conditions tracked by NAB - all fell back to their long-run averages in April.

Chief economist at the bank, Alan Oster, said this "marks a bit of a milestone" after a long and gradual moderation in conditions from exceptionally high levels in 2022, spurred on by the pandemic recovery.

Overall, business conditions fell two points to seven index points, which is broadly around the long-run average.

"Basically, (the index) is just saying that, you know, the economy is still slowing but it's okay," Mr Oster said.

Business confidence levels remained unchanged, based on the survey, albeit at below-average levels.

The survey also picked up promising signs of easing cost pressures for businesses, in welcome news for the inflation outlook.

Fresh forecasts from Treasury show inflation back within the two-to-three per cent target range by the end of the year, well ahead of the RBA's own predictions to have consumer prices contained by the end of 2025.

Finance Minister Katy Gallagher said timing explained the discrepancies, with the RBA's forecasts prepared ahead of Tuesday's federal budget - which is expected to contain measures to tackle price pressures.