Household spending rebound makes the RBA’s job harder

The ABS Monthly Household Spending Indicator measures household expenditure using bank transactions, supermarket data, vehicle sales and other sources. The monthly figures are published in current prices, so they include both changes in the quantity purchased and changes in prices.

Australian household spending rose 1.1% in July, following increases of 1.0% in June and 1.2% in May. Spending is now 7.0% higher than a year ago, its strongest annual growth since June 2023.

Importantly, this is not simply a story about households being forced to spend more on necessities.

Discretionary spending increased 1.0% in July and 7.8% over the year, compared with annual growth of 5.6% for non-discretionary expenditure. Spending on services rose 1.5% during July, while all nine major spending categories recorded increases.

That creates a political problem.

The RBA has already increased interest rates three times during 2026 and left the cash rate at 4.35% on 11 August, arguing that inflation remains too high and capacity pressures persist. July inflation was still 3.5%, with trimmed mean inflation at 3.6%.

Today's spending figures give the RBA little evidence that household demand is collapsing under those higher rates.

They also reduce Canberra's room for further broad-based cost-of-living stimulus. Measures that increase household purchasing power may be politically attractive, but stronger discretionary spending suggests some of that support could flow straight back into demand.

The figures do not mean every household is comfortable. But at the aggregate level, Australian consumers are spending again — and that makes the inflation fight more difficult.