Rising living costs push 1 in 3 Australians into debt
Australians are increasingly turning to debt to make ends meet, with new research showing one in three consumers used credit to cover everyday expenses.
- One in three Australians used debt to pay for essentials in the past year.
- About 37% of households used one form of credit to manage another.
- Home owners tightened spending as higher mortgage costs weighed on budgets
- Younger Australians are spending less and relying on credit more.
Experian Australia’s inaugural Spend Index Report 2026 found more than a third of Australians took on debt to pay for essentials last year.
The report found 33% of consumers relied on credit to cover necessities, with groceries and housing emerging as the biggest cost-of-living pressure points.
“Groceries emerged as the most widely felt pressure point, nominated by more Australians (34%) than any other as the hardest-hit household expenses,” the report stated.
Experian cited bureau data showing grocery spending growth slowed to just 3% in 2025, suggesting households were cutting back on volumes and trading down to cheaper alternatives.
See also: Savings.com.au's Grocery Price Index
Separate findings by Commonwealth Bank likewise highlighted the mounting pressure from non-discretionary spending.
CommBank’s Household Spending Insights (HSI) Index rose 5.6% in the year to June, with essential spending increasing 6.1% annually due in part to rising utility costs (up 10.7%).
“Stronger annual essentials spend likely reflects the end of the electricity rebates as households allocated more to spending on utilities,” CommBank head of Australian economics Belinda Allen said.
More Aussies repaying debt with debt
Aside from turning to debt to cover essential costs, Experian found 37% of Australians had used one form of credit to manage another.
Consumers increasingly turned to flexible, short-term borrowing, with buy now, pay later (BNPL) spending rising 16% in 2025.
While credit cards still accounted for "a much larger share" of overall spending, Experian found consumers with BNPL accounts relied less on credit cards, with usage falling from 46% to 31%.
The proportion of households using both BNPL and credit cards rose 4%.
The report warned of the risk of debt spirals among consumers juggling multiple credit products, noting 41% of Australians admitted struggling to manage repayments.
“The greatest risks appear not to be linked to any single product, but to households relying on multiple credit products simultaneously,” the report said.
Homeowners spend less, renters spend more
Both discretionary and non-discretionary spending among homeowners slowed in 2025, suggesting more households were directing their budget towards housing costs.
Experian said home loan values had increased by 18% over three years, broadly in line with latest ABS data showing the value of new dwelling loan commitments rose 18.5% over the year.
Almost half of mortgage holders said higher interest rates had affected their ability to meet housing costs.
Despite home values rising 7.3% over the year to June and elevated interest rates, 3% of Australians still identified entering the property market as a key financial priority in 2026.
See also: Another cash rate increase in August: Westpac more convinced
“Recent home buyers are doubly affected by higher mortgage debts and higher interest rates, while existing borrowers are already navigating higher rates,” the report stated.
By contrast, renters recorded stronger spending growth across essentials, particularly groceries, as well non-essentials such as retail and entertainment.
This occurred despite rents rising 8% in 2025, following a 10% increase in the year prior.
Unlike homeowners encumbered by mortgage repayments, renters maintained stronger spending levels despite broader affordability issues, the report found.
However, it also suggested some renters may be giving up on the prospect of home ownership.
“This may also reflect a growing sense among younger Australians that home ownership is increasingly out of reach, shifting priorities away from long-term saving and towards day-to-day consumption,” Experian said.
With rents continuing to climb to record highs, rising 7.7% for houses across the combined capitals, household budgets are likely to come under even greater strain.
According to CommBank, both mortgaged home owners and renters increased spending over the past year, with food and beverages getting the bulk of their household budgets.
Cost-of-living pressure hit younger households hardest
Both reports suggest younger Australians are feeling the cost-of-living squeeze more acutely than other demographic groups.
CommBank said individuals aged 25-34 recorded the weakest spending growth at 4.2%, and just 4.5% by those aged 35-44 and 45-54.
“These age groups are more likely to have a mortgage, making them more sensitive to higher interest rates,” Ms Allen said.
Similarly, Experian found middle-aged households are tightening the purse strings “more deliberately”, with spending growth slowing across multiple categories.
Under-35s are increasingly relying on credit products, with spending continuing to rise across both BNPL and credit cards.
See also: Young Aussies are less happy - and housing is to blame
While younger Australians are spending less, older generations are spending more.
Consumers aged 55 and over increased spending across dining, retail and travel, according to the Experian report.
CommBank likewise revealed the oldest age cohort (aged 65 and up) posted the strongest spending growth at 10.1%.
Unlike younger generations using debt to bridge the gap between income and rising costs, older Aussies are drawing on savings rather than credit.
“[This points] to the resilience that comes with accumulated financial buffers,” Experian said.
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