Australian household spending rose in January, supported by summer events and a resilient labour market, but the Commonwealth Bank of Australia warns higher interest rates and moderating income growth could slow momentum in 2026
Australian households began 2026 on a strong footing, buoyed by summer events and a resilient jobs market, but rising borrowing costs are expected to slow consumer momentum as the year progresses, the Commonwealth Bank of Australia has warned.
The bank’s latest Household Spending Insights (HSI) Index showed consumption rose 0.5 per cent in January, extending the run of monthly gains to 16 consecutive months. Annual spending growth stood at 5.6 per cent, easing slightly after a robust end to 2025.
Recreation was among the strongest-performing categories, climbing 1 per cent in January and 7.6 per cent over the year. Major summer attractions, including the Australian Open, along with music festivals and holiday travel, drove higher spending on ticketing services, tourism operators and travel agencies.
“We’ve now seen consistent monthly spending growth for well over a year, which points to steady underlying demand across the economy,” said Ashwin Clarke, Senior Economist at CBA.
However, Clarke cautioned that the backdrop is becoming more challenging.
“While consumers have continued to spend, higher interest rates and easing income growth are likely to slow that momentum as the year progresses,” he said.
Utilities bills jump as rebates wind back
Essential costs also played a significant role in January’s spending increase.
Utilities recorded the largest monthly gain, rising 3.7 per cent after another strong lift in December. Over the past year, utilities spending has surged 15.6 per cent, largely reflecting higher electricity and gas bills as federal energy rebates were scaled back.
Wage growth steady, but pressures persist
CBA data showed quarterly wage growth held at 0.8 per cent in January, with annual growth at 3.1 per cent. While wage outcomes have stabilised, weak productivity growth continues to add to labour cost pressures for businesses, keeping inflation risks in focus.
The January spending data predates the latest rate increase by the Reserve Bank of Australia, and markets are pricing in the possibility of further tightening if inflation proves persistent.
Mortgage holders have led spending growth over the past year, but they remain the most exposed to higher repayments as interest rates rise. Renters and outright home owners have recorded more moderate gains.
End of Article
Leave a Reply