Key points
- Hospitality spending rose 0.7%, continuing gains from November, up 7.1% over the year.
- Food and beverage spending jumped 1% in December, the biggest lift since April.
- Spending momentum supports expectation for RBA rate hike in February.
Australians opened their wallets in the lead-up to Christmas, splashing out on butchers, liquor stores and dining out as festive entertaining took centre stage, according to the latest CommBank Household Spending Insights. Food and beverage spending recorded its strongest monthly rise since April, up 1 per cent, while hospitality lifted 0.7 per cent for the second consecutive month.
Spending streak continues
The HSI index rose 0.7 per cent in December, marking 15 months of consecutive gains. Annual growth sits at 6.3 per cent, suggesting real household consumption is tracking slightly above expectations.
"The strength in household spending late in the year was more robust than anticipated and points to a willingness to spend that exceeds our earlier forecasts," Belinda Allen, Head of Australian Economics, said.
"This momentum adds to concerns the economy may be running above its speed limit , supporting our expectation for a February rate hike."
Utilities surge as rebates expire
Utilities saw the sharpest increase in spending in December, up 6.4 per cent as government energy rebates expired, boosting annual growth in utilities spending to 15 per cent.
Communications and digital spending climbed 0.7 per cent, driven by streaming and mobile services, while transport costs rose 0.5 per cent, fuelled by higher petrol prices and increased ride-sharing activity. Recreation eased to 0.2 per cent growth in the month after a bumper November driven by major sporting and concert events.
State-by-state trends show WA leading
Western Australia led the monthly gains, up 0.9 per cent, followed by Queensland at 0.7 per cent. New South Wales and Victoria recorded softer growth of just 0.1 per cent. Over the year, WA and Queensland remain standout performers, with annual growth above 8 per cent.
What does this mean for interest rates?
The Reserve Bank of Australia will closely household spending data and the upcoming December quarter CPI release on 28 January. Strong spending is contributing to inflation and could reinforce the case for tighter policy as inflation risks persist.
"The Australian economy is at or above its speed limit and the RBA will be weighing up whether this momentum risks pushing inflation higher," Allen said. "The upcoming CPI print will be critical in determining the timing of any rate hike."
