Household spending slowing amid rate pressure, CommBank data shows

Household spending in Australia rose by 0.3% in June, according to the Commonwealth Bank's Household Spending Insights (HSI) index, though the data points to a broader softening in consumer activity driven by inflation, elevated interest rates, and the continuing impact of the Iran conflict.

Growth was recorded in 10 of the 12 spending categories, led by utilities and education. Retail spending was subdued despite end-of-financial-year sales, edging up just 0.2% in June, compared with 0.6% in May.

Hospitality spending grew only 0.1%, down from 0.9% in May, suggesting that sporting events during the month provided little additional impetus.

"The softening we are seeing in the CommBank HSI is broadly in line with our expectation that household spending will slow over the remainder of this year," said Belinda Allen, head of Australian economics at Commonwealth Bank. "Slower household income growth, together with the 'wealth effect' from a downturn in the housing market is expected to weigh on spending. However, consumers may dip into their savings buffers which would see spending slow less than we expect.

"The last three months has seen some volatile moves in the HSI due to the up and down of petrol prices, seasonality around payments of bills for education and utilities as well the timing of sales. The Iran war, the downturn in the housing market and higher interest rates continue to weigh on consumer spending.

"For the first six months of 2026, the average monthly increase is sitting at 0.3%, slightly lower than the 0.5% average through 2025. With the rate of inflation higher, it does suggest the volume of spending growth has softened."

Seasonally adjusted recreational spending decelerated sharply, falling from 2.3% growth in May to 0.2% in June. Lower outlays at ski resorts, camping stores, museums, galleries, and tour operators were the primary drag, with ski resort spending recording a significant year-on-year decline, attributed in part to poor weather at the start of the season. Offsetting this, continued annual growth in online travel bookings, airline travel, fitness centres, travel agencies, and sporting goods kept the category in positive territory.

Older Australians lead; mortgage holders trail

Annual spending growth was strongest among those aged 65 and over, rising 10.1% in the 12 months to June 2026. The 55–64 cohort recorded growth of 6.2%, and the 18–24 age group rose 5.4%.

Growth was weakest among cohorts most exposed to mortgage debt. Annual spending rose 4.5% for the 35–44 and 45–54 age groups, and 4.2% for 25–34-year-olds. Compared with June 2025, spending growth moderated across nearly all age groups, with the steepest slowdown recorded among 18–24-year-olds, where growth dropped from 9.9% to 5.4% per year.

Regional growth outpaces capital cities

Annual household spending growth in regional areas accelerated in the year to June 2026 relative to the prior year, while metro area growth slowed. Regional Queensland and regional Western Australia were the strongest performers; metro New South Wales, the ACT, and metro Victoria were the weakest. 

"Weaker spending in metro areas of NSW, Victoria and the ACT reflect the jurisdictions that recorded the weakest home price growth over the past 12 months, highlighting how the downturn in the housing market and higher interest rates are beginning to weigh on consumer spending," Allen said.

"Regional outperformance in part reflects stronger population growth and demand, particularly in Qld and WA. However, the conflict in Iran may have also contributed, with regions more exposed to the sharp increases in diesel prices compared to metro areas."

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