Spending surge adds fuel to February rate hike calls

The new figures reveal that household spending has grown by 6.3 per cent in a year (when household spending was $74.6 billion), the largest annual increase since September 2023.

The increase was broad-based, with eight of the nine spending categories rising, exceeding market expectations. Discretionary spending segments rose 1.2 per cent – taking annual growth to 6.1 per cent over the year – the highest since mid-2023. Meanwhile, non-discretionary spending has held steady at around 0.8 per cent over the past three months.

Black Friday sales supported a continued growth in goods spending, while major music concerts (such as Oasis and Metallica) and sporting fixtures over the month (such as The Ashes and the Melbourne Cup) lifted recreational spending.

The biggest monthly rises were in furnishings and household equipment (2.2 per cent), clothing and footwear (2.0 per cent), and recreation and culture (1.7 per cent).

On an annual basis, miscellaneous goods and services (10.6 per cent) and recreation and culture (8.6 per cent) posted the highest growth. Services spending was 7.8 per cent higher than in November 2024, while goods spending was up 4.9 per cent.

By state, spending grew across all eight states and territories, led by Tasmania (up 2.1 per cent) and Western Australia (1.7 per cent).

In Tasmania, the main drivers were hotels, cafes, and restaurants (5.1 per cent); transport (3.7 per cent); and clothing and footwear (2.9 per cent), while Western Australia saw the biggest increases in recreation and culture (3.3 per cent), clothing and footwear (3.2 per cent), and furnishings and household equipment (2.8 per cent).

Tom Lay, ABS head of business statistics, said: “Household spending remained strong in November, continuing the strong rises in services and goods spending seen in October.

“Services spending rose by 1.2 per cent, driven by major events, including concerts and sporting fixtures. These events are linked to higher spending on catering, transport, and recreation and cultural activities.

“Growth in goods spending, which lifted 0.9 per cent, was driven by Black Friday sales. Clothing, footwear, furnishings, and electronics seeing the biggest gains as consumers took advantage of widespread discounts.”

Lender economists have suggested that household spending strength is likely to continue and may play a strong role in the Reserve Bank of Australia’s (RBA) monetary policy decision for February.

Economists at the Commonwealth Bank of Australia commented on Monday: “The release suggests household willingness to spend is stronger than we thought, and unless spending declines precipitously in December, we will get strong household consumption growth over the December quarter.

“Strong spending will add to concerns in the RBA about the economy breaching its speed limit and on the margin supports our expectation for a rate hike in February.”

Similarly, senior associate economist at National Australia Bank (NAB), Jessie Cameron, said the ongoing momentum in consumer demand is likely to influence the RBA’s February decision.

“Evolving seasonal patterns around Black Friday add some uncertainty and may set up some payback next month, but ongoing momentum in consumer demand should leave the RBA uncomfortable that cyclical conditions will put sufficient downward pressure on inflation over the forecast horizon,” Cameron said.

Over at Westpac, economist Neha Sharma flagged that household spending has risen by more than 1 per cent for two consecutive months for the first time since October 2022 and that household spending has averaged 1.2 per cent a month so far in Q4, up from 0.3 per cent a month in Q3.

Sharma commented: “While some of this may reflect firmer prices, real household consumption is still likely to post another solid Q4 result. The 2026 outlook is less certain. Real disposable incomes have been recovering but are likely to see slower growth this year as job gains moderate and policy provides less support. Against this, positive wealth effects may start to become more prominent, especially in smaller capital cities where house prices have risen 25–30 per cent over the last two years.”

ANZ economists added that the divergence between strong consumer spending and a slowing housing market makes the RBA’s policy stance complex.

“While the recent signs of cooling in the housing market might suggest to the RBA Monetary Policy Board that policy is slightly restrictive, the strength in consumer spending points to a robustness in demand and a genuine pick-up in private sector activity over 2025,” they said.

“The evolution of consumer confidence data given recent discussion around the risk of rate hikes this year will provide a useful guide to whether that pick-up either accelerates further, or moderates, in 2026.”

ANZ highlighted that Western Australia continues to outperform, Queensland is performing strongly, and Victoria lags. These regional differences are relevant for the RBA in assessing whether consumer demand is strong enough to sustain inflationary pressures across the country, the ANZ economists said.

The strong household spending in November also aligns with persistently elevated inflation, with the ABS last week reporting a 3.4 per cent rise in the consumer price index over the year to November 2025, above the RBA’s 2–3 per cent target range, suggesting that robust consumer demand may continue to put upward pressure on prices.

But while inflation eased slightly in November, Australia’s major banks last week said near-term interest rate cuts remain unlikely, with their views split between a continued hold and a hike. Indeed, hopes of interest rate cuts have been all but extinguished after RBA deputy governor Andrew Hauser warned last week that the chances of near-term easing remain “very low”.

The next RBA cash rate decision is due on 3 February, with economists from all three major banks flagging that the unexpectedly strong household spending data may increase the likelihood of a rate hike.

[Related: 2 majors say rates will rise in February]