By James Glynn


SYDNEY--Australian consumers are still spending strongly in areas such as transport and education, but sectors of the economy sensitive to higher interest rates such as retail and home buying are starting to soften quickly as the policy screws are tightened.

The Commonwealth Bank of Australia's household spending intentions index rose by a modest 0.9% in June from May, taking the index back to an equal record high of 117.3. On an annual basis the HSI index is up 11.9% relative to a year ago.

Still, it is important to note that the gains in the HSI Index for June were relatively narrowly based, said Stephen Halmarick, CBA's chief economist.

Big gains were seen for transport, which reflects higher gasoline prices, he said. High spending in areas such as education and household services were also recorded.

However, the more interest rate-sensitive sectors of the economy are clearly starting to show the impact of the RBA's monetary policy tightening cycle, with entertainment, home buying and retail all declining on the month, Mr. Halmarick added.

With the RBA lifting interest rates by 50 basis points in July and with further increases expected in the months ahead, CBA would expect to see the interest rate-sensitive components of the index weaken further in coming months, he added.


Write to James Glynn at james.glynn@wsj.com


(END) Dow Jones Newswires

07-11-22 2012ET