After a slow start, consumers find their stride in 2025
Australian household spending bounced back strongly in the second quarter of 2025, marking the fastest growth in two years as consumers regained confidence following earlier economic uncertainty.
The Westpac-DataX Consumer Panel revealed average customer spending rose 1.5% in Q2, nearly double the 0.6% increase recorded in Q1. Annual spending growth accelerated to 4.8%, the fastest pace since early 2023.
“The consumer recovery regained some momentum in Q2 after faltering in Q1,” said economist Neha Sharma, who authored the report. She noted that the recent data reinforce “signals from the ABS [Australian Bureau of Statistics] retail and household spending indicators that the recovery has gathered some much-needed traction.”
The improvement was attributed to discretionary spending categories, with retail shopping, dining and entertainment all rebounding after posting negative or flat results in the previous quarter. On a monthly basis, spending picked up solidly in May and June, both recording 1.2% growth.
Savings continue growing
Despite increased spending, Australian consumers haven’t sacrificed their savings. Total savings balances rose 1.9% in Q2 to an average of $38,900 per customer, compared to just 0.6% growth in Q1.
The strongest savings growth was recorded among 25-34 year-olds, who added an average of $684 to their accounts. This cohort appears focused on building deposits for home purchases, with recent data showing 18-34 year-olds are now positive about dwelling purchase intentions.
Income boost drives activity
Higher incomes underpinned the spending lift, with average net income rising 2.9% in Q2, partially reversing a 3.6% decline in Q1. However, a recent pick-up in personal credit growth suggests some consumers may be using debt to finance discretionary purchases.
According to the report, personal credit growth in June rose at its fastest monthly pace since 2007, reaching a 17-year high on an annual basis.
Mortgage buffers build
Mortgage holders continued strengthening their financial positions, with savings buffers now equivalent to 16.6 months of essential expenses. The 65+ age group became the first to surpass their pandemic-era buffer levels, while the draw-down phase for high-income mortgage holders has ended.
Average savings balances across the panel sit 11.7% above their previous peak, though this falls short after accounting for 14.4% inflation over the same period.
The data suggests Australian consumers are successfully balancing a spending recovery with continued financial prudence as economic conditions stabilise. This follows recent inflation figures, with the Consumer Price Index rising 0.7% in the June quarter and bringing annual inflation down to 2.1% – the lowest since March 2021 and softer than market forecasts. While the Reserve Bank of Australia’s preferred trimmed mean inflation edged up to 2.7%, economists at ANZ said the result supports a 25-basis-point cash rate cut in August, which would lower the official rate to 3.6%.
