According to the CommBank Household Spending Insights (HSI) Index, spending rose for the third consecutive month in June, increasing by 0.3 per cent following gains of 0.4 per cent in both April and May.
Eight of the twelve HSI categories recorded growth for the month, with Utilities leading the way at 2.9 per cent, followed by Education at 1.1 per cent and Communications & Digital at 1.0 per cent.
Three categories experienced declines in June, with Hospitality dropping 0.8 per cent, while Motor Vehicle and Recreation both fell by 0.1 per cent.
These categories had performed relatively well in May, highlighting the inconsistent nature of consumer spending patterns in the current economic climate.
For the entire June quarter, the HSI increased by 1.4 per cent, slightly above the 1.2 per cent recorded in the March quarter but still below the 1.6 per cent growth seen in the December quarter of 2024.
CBA Senior Economist, Belinda Allen, said that spending patterns are beginning to show more consistency month-to-month.
“Household spending is starting to show signs of consistency month-on-month and should continue to pick up this year as consumers begin to loosen their purse strings,” Ms Allen said.
“This recovery is taking longer than expected to occur, but there are green shoots emerging.”
Ms Allen said that mortgage holders have adjusted their spending habits over the past year.
“Homeowners with a mortgage have reduced spending on transport, hospitality, and food and beverage goods over the past year but lower interest rates are expected to boost disposable income in the coming months,” she said.
“Renters continues to spend more following an increase in April and May.”
Despite these improvements, consumers remain cautious with their finances, with a clear preference for saving and debt reduction.
Recent data revealed that only 10 per cent of eligible home loan customers chose to reduce their mortgage direct debit payments following the May interest rate cut, indicating continued financial prudence.
The Reserve Bank of Australia’s decision to maintain interest rates at 3.85 per cent in July was unexpected and could impact spending recovery. CBA anticipates a rate cut in August followed by another potential reduction in November.
“While we still anticipate a pickup in household spending in 2025, a slower rate cutting cycle could soften this recovery over the remainder of the year,” Ms Allen said.
Different demographic groups showed varying spending patterns in June. Homeowners with mortgages saw yearly spending growth per capita of 5.2 per cent, while renters’ spending increased to 4.2 per cent.
Homeowners without mortgages demonstrated the weakest growth at 3.5 per cent.
Regionally, New South Wales recorded the strongest household spending growth in June at 0.7 per cent and led annual growth at 8.4 per cent.
Queensland showed strong recovery with 7.3 per cent annual growth despite setbacks from ex-tropical cyclone Alfred in March.
