Key points
- The Household Spending Insights (HSI) Index rose 0.2% in May, following a fall in April.
- The strongest spending categories were Recreation (2.3%) and Hospitality (1.0%), boosted by sporting events like the State of Origin and a recovery in travel.
- Annual spending growth printed at 4.5%, but CBA economists expect spending to slow through the second half of 2026 under the weight of weaker household income growth.
Household spending edged higher in May, returning to modest growth after a dip in April, as Australians lifted spending on discretionary items despite ongoing cost of living pressures.
The latest CommBank Household Spending Insights (HSI) Index showed gains across seven of the 12 categories, led by recreation and hospitality, with travel demand seeing some recovery and major events like State of Origin football games series supporting activity.
"Household spending is continuing to grow, despite a more uneven pattern in recent months," CommBank's Head of Australian Economics, Belinda Allen said.
"While higher interest rates and inflation are weighing on households, consumers were willing to spend on experiences like travel, dining and events during the month of May."
Not all categories strengthened in the month. Utilities recorded the largest decline, falling 3.9 per cent due to seasonal volatility, while Education and Transport spending also eased, partly reflecting the timing of the bill payment cycle and lower petrol prices.
Softness emerging for Australians with a mortgage
Those with a mortgage are beginning to show signs of slowing down their spending, after outperforming other households over the past year, likely reflecting higher interest rate costs.
By contrast, renters have taken the lead, recording the fastest pace of annual spending growth in May amongst other households.
Renters stand out for their stronger spending on discretionary categories, especially hospitality, highlighting a continued preference for experiences.
Spending expected to slow in 2026
Household spending is expected to soften further in the second half of 2026 as higher borrowing costs and inflation continue to take a toll on household budgets.
"The RBA held the cash rate steady in June but remains willing to hike again if inflation proves more persistent than expected," said Allen.
"The RBA acknowledged that consumer spending was slowing. We continue to expect the RBA to remain on hold for the remainder of 2026 and expect two rate cuts in 2027 based on our economic outlook."
Read the full report here .
