(March 5): Australia’s household spending rebounded in January, signalling resilient consumer demand even as the outlook is clouded by the risk of further interest-rate increases and higher energy costs stemming from the escalating Middle East conflict.
Consumption rose 0.3% from the prior month, just missing economists’ predictions for a 0.4% gain, according to data from the Australian Bureau of Statistics (ABS) on Thursday. The result followed an unexpected decline in December and left spending up 4.6% from a year earlier, also below estimates.
“Household spending returned to growth in January, rising in five of the nine spending categories,” said Tom Lay, head of business statistics at the ABS. Spending on services drove the rise, he added.
The numbers provide a snapshot of the Australian consumer at the start of 2026 and come at a critical juncture for the central bank which has warned that a rate hike this month is a “live” possibility. The Reserve Bank in February became the first monetary authority in the developed world to tighten policy settings this year, in an effort to cool stubborn inflation.
Recent data have shown an economy that remains firm overall. The labour market is tight and price pressures elevated, though gross domestic product figures this week indicated household consumption grew a softer-than-expected 0.3% in the December quarter. The household savings ratio climbed to its highest level since the third quarter of 2022, suggesting some caution among consumers.
Unit labour costs — a key gauge of domestic inflation pressure — eased for a second consecutive quarter, offering tentative relief for policymakers.
See also: Judge orders US to stop calculating emergency tariffs in refund push
Household consumption accounts for more than half of Australia’s output, making the monthly data an important input into the RBA’s deliberations. Markets and economists currently expect at least one further rate increase this year, which would lift the cash rate to 4.1%.
Thursday’s data also showed:
- Spending on services advanced 1%, driven by digital streaming services and travel, while goods spending slid 0.3%;
- Essential spending rose 0.8% and was led by health services and motor vehicle repairs;
- Discretionary spending was up just 0.1%.
Uploaded by Liza Shireen Koshy
