Relief for squeezed households as inflation drops at long last

Tim Wallace
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WAGE growth will soon start outstripping inflation, at last giving a boost to confidence and the economy, according to a Deloitte report out today.

But the impact will be muted for now as households remain cautious because of the weak state of the economy.

Just 13 per cent of consumers expect to spend more on essentials including food, housing and transport over the next three months, and 12 per cent expect to spend less.

That compares with 19 per cent who anticipated spending more three months ago.

“For most of the past five years, inflation has run ahead of the growth of consumer earnings,” said Deloitte’s chief economist Ian Stewart. “Over the next year we are likely to see that trend reverse, giving consumer spending power a much-needed boost.”

However, confidence is only improving slowly – 16 per cent are wary of splashing out on big-ticket items such as holidays, up from 14 per cent three months ago, while 27 per cent worry about their personal debt levels, up from 22 per cent in the previous quarter.