Households will continue to struggle

After slowing sharply in the third quarter, there have been some encouraging signs in recent weeks about the prospects for real consumption growth in Australia in the fourth quarter. In particular, retail sales bounced back to life in October following four weak months, the surge in jobs growth in November will boost household incomes and consumer confidence shot up to its highest level in four years in December. But we doubt this means that the worst is now behind the household sector. We expect consumption growth to stay around 2.0% throughout 2018 as weak wage growth, rising household debt and a slowing housing market prompt consumers to keep a lid on spending.