Govt spending cuts are putting the brakes on the economy

CUTS to government spending was the biggest worry on the minds of consumers as they slashed their spending on "non-essential" goods in the past year, a consumer survey has found.

The Choice survey of about 1000 Australians found that the cost of living had forced some 46% of Australians to also cut back on "essential spending".

It found more than half of those surveyed said clothing and entertainment were at the top of their list of household cuts, while one in three respondents said it was "difficult to get by" on their current income.

Those facing the toughest financial times were low income households, renters and parents with school-aged children.

Respondents said the biggest household costs they faced were found in electricity bills at 84% and fuel at 81%, followed by food and groceries at 77%.

Choice chief executive Alan Kirkland said one in five respondents also reported using credit or borrowing money from family or friends to help make ends meet between pays.

"This reveals some striking concerns with cost-of-living, which is perhaps not surprising at a time when inflation is outstripping sluggish wages growth, retail sales are fragile and the political debate remains focused on household expenses," he said.

It also follows the jobless rate hitting a 12-year high this week, up 0.4% to 6.4% in July, and the 12th consecutive Reserve Bank decision to hold the cash rate at just 2.5%.

The ABS job figures also revealed the unemployment rate among young Australians, aged 15 to 24, was rocketing, up 0.5% to 14.1% in July this year.

It was the highest unemployment rate for the age group since late 2001, reinforcing the survey results showing that as many as 45% of renters reported "difficulty" getting by, compared with only a quarter of mortgage holders.

The high jobless rate was also seized on this week by social services groups as evidence that the Abbott government should not cut income support, especially the Newstart and youth allowances, as part of its welfare review.

The RBA board decision also showed Australia's economic outlook remained "a little below trend" and despite moderate growth in consumer spending and a strong expansion in housing construction, neither was enough to warrant changing interest rates.

While the survey results showed the past year had been tough for consumers, the latest retail trade figures revealed a 0.6% rise in trade in June after a 0.3% fall in May.

However, retail trade volumes fell in five of Australia's eight states in the June quarter this year, with only New South Wales, Tasmania and Northern Territory showing positive gains.



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