Australian household spending showed a modest increase of 0.1% in August, according to Commonwealth Bank's Household Spending Insights. This follows a period of choppiness throughout much of the year, with overall consumption easing. The flattening in August spending is attributed to a decline in discretionary categories, particularly sports and recreation, as consumers face higher fuel prices and interest rates.
While July saw a significant surge in overall household spending, with a 1.1% increase month-over-month and a 7% year-over-year jump, August's figures suggest a cooling trend. Data from the Australian Bureau of Statistics (ABS) in July indicated that discretionary spending, including gambling, major sporting events, and cinema, accounted for 90% of all real per-person growth in household spending, reaching $82.3 billion. This growth was notably faster than inflation at 7.8% compared to a 3.5% inflation increase.
The slowdown in August spending aligns with observations from CBA, which noted a broad-based easing in consumption. Travel, particularly commercial airfares and cruise lines, saw spending fall back towards more typical levels after a strong June quarter. Accommodation spending remained below 2025 levels for most of 2026, though online travel bookings showed an increase. Higher petrol prices, following the expiry of fuel excise relief and the escalation of the Iran war, have become a significant headwind, with petrol station spending moving above 2025 levels from early August and expected to remain elevated.
The Reserve Bank of Australia (RBA) faces a dilemma as past interest rate hikes have not fully curbed discretionary spending, with some analysts suggesting their effectiveness is diminishing. A further rate hike, anticipated by CBA to be 25 basis points to 4.60% at the September meeting, is expected to further impact households, especially those with variable-rate mortgages. Belinda Allen, CBA's Head of Australian Economics, noted that while some spending, such as on fuel, insurance, and health, is unavoidable, the overall mix has shifted towards essentials and away from goods tied to the housing cycle, indicating consumers are choosing carefully amidst inflationary pressures and a downturn in the housing market.
Although July saw robust spending, the broader trend through 2026 indicates a gradual slowdown. The average monthly increase in the CommBank HSI for the first six months of 2026 was 0.3%, lower than the 0.5% average in 2025. This, combined with higher inflation, suggests a softening in the volume of spending growth. The continued choppiness in spending, influenced by factors like petrol prices and seasonal variations, highlights the challenging economic environment for Australian households.
