The seasonally adjusted August figure showed household spending growth slowed compared to the June and July figures of 0.4% and 0.5% respectively.
But it still marked the fourth increase in a row, with household spending rising in 10 of the last 12 months.
The Household Spending Indicator (HSI) data, released by the Australian Bureau of Statistics on Thursday, shows spending is now 5% higher than it was in August 2024.
Will spending scupper further cash rate cuts?
The data comes just two days after the Reserve Bank of Australia (RBA) kept the cash rate on hold, noting renewed concerns about inflation.
The red flag was raised when August's CPI data showed headline inflation had risen to an annualised 3%, its highest rate in more than 12 months.
It led to two of Australia's big four banks - NAB and CommBank - scrapping their forecasts of a November cash rate cut.
CommBank held fire until after the RBA delivered its post-meeting monetary policy statement and governor Michele Bullock fronted her customary media conference.
CBA economists, along with many others, noted the hawkish tone of both with the sniff of inflation back in the air.
The bank's own data had identified a recovery in both consumer sentiment and spending which, CBA economists said, had been "slower and softer than expected" after the post-pandemic cost-of-living squeeze.
Household budget pressures easing
In its latest Financial Stability Review, the RBA also noted household cash flows have improved as inflation has moderated and interest rates have dropped.
Real disposable income per capita has been steadily rising over recent quarters to now sit slightly above pre-pandemic levels.
The review notes mortgage payments have declined as three cash rate cuts in 2025 have been passed on, although they remain higher as a share of household disposable income than before the pandemic.
RBA figures show many households have continued to make extra payments into offset accounts or redraw, adding to their savings buffers.
Aussies had nearly $302 billion stashed in their offset accounts in the June quarter, down slightly from the record high $307 billion in March.
This coincides with the uptick in consumer spending and the slight decrease in the household savings ratio over the same period.
See also: Home Loan Offset Account Calculator
So what are Australians spending on?
The latest HSI data showed Australians were spending more on airline travel and accommodation during August.
Spending was up in five of the nine categories, led by transport which rose 0.8% over the month.
The largest falls in spending were on recreation and culture, and alcohol and tobacco, with both categories down 0.9%.
In annual terms, miscellaneous goods and services (+8.9%) and health (+8.0%) recorded the highest growth rates in spending during the 12 months to August.
Services spending was 8.1% higher than in August 2024, far outstripping goods spending, up 2.5%.
CPI data also shows services, such as rent and insurances, are the main drivers of inflationary pressure in the economy.
How could spending affect future interest rate cuts?
The RBA monetary policy board will assess whether the recent lift in household spending is likely to reignite inflation.
This week, RBA governor Michele Bullock acknowledged recent data that suggested inflation might be higher than the RBA had forecast, noting consumer spending was picking up.
But that was before the August data showing household spending growth had slowed in the same month as the RBA's latest cash rate cut to 3.60%.
The best gauge of any inflationary flow-on will be in the key September quarter inflation data due out on 29 October, less than a week before the next RBA board meeting on 3-4 November.
With markets now decidedly cooled on the prospect of another cash rate cut in 2025, most economists agree the current easing cycle is not over, merely postponed until 2026.
Advertisement
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
