Household Spending Edges Higher in June, But Caution Lingers
The CommBank Household Spending Insights (HSI) Index rose for the third consecutive month in June, increasing by 0.3% following gains of 0.4% in both April and May. While spending momentum appears to be building, consumers remain selective and cautious with their purchasing decisions.
Eight out of the twelve spending categories tracked by the index recorded growth in June. The largest increases came from:
- Utilities (+2.9%), which continues to show volatility due to the timing of government energy rebates
- Education (+1.1%)
- Communications & Digital (+1.0%), potentially boosted by the anticipated release of the Nintendo Switch 2
Conversely, three categories experienced declines:
- Hospitality (-0.8%)
- Motor Vehicles (-0.1%)
- Recreation (-0.1%)
These declines follow relatively strong performances in May and underscore the variable nature of consumer activity.
“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,” said Belinda Allen, Senior Economist at CBA.
“This recovery is taking longer than expected, but there are green shoots emerging. Annual growth has improved, though the recovery is not yet assured. Consumer behaviour during sales events and product launches shows people remain deliberate in their spending.”
Cautious Optimism Despite Interest Rate Relief
Despite recent interest rate cuts, Australians remain conservative with their finances. CBA data shows that only 10% of eligible home loan customers reduced their mortgage direct debit payments following the RBA’s May rate cut—mirroring similar behaviour after February’s cut. That figure eventually rose to just 14% before the May decision.
This savings-focused mindset suggests consumers are using rate relief to pay down debt rather than increase spending.
Quarterly and Demographic Trends
Looking at the broader picture, household spending grew by 1.4% in the June quarter—up slightly from 1.2% in Q1 but still below the 1.6% gain in the final quarter of 2024.
Spending growth also varied by housing tenure:
- Homeowners without a mortgage recorded the weakest annual spending growth at 3.5%
- Homeowners with a mortgage saw an annual increase of 5.2%, supported by stronger spending in June
- Renters posted a 4.2% increase, continuing gains seen in April and May
“Mortgage holders have cut back over the past year on transport, hospitality, and food and beverage spending, but lower interest rates are expected to boost disposable income in the months ahead,” said Allen. “Meanwhile, renters continue to show resilience, with spending remaining elevated.”
NSW Leads National Spending Growth
On a state level, New South Wales posted the strongest household spending growth in June, rising 0.7%. Over the past year, NSW has climbed to the top of the national leaderboard with 8.4% annual growth.
Queensland, which saw the weakest growth in March due to ex-Tropical Cyclone Alfred, continued its rebound with a 7.3% year-on-year increase.
Outlook: Rate Cuts May Support a Gradual Recovery
While the RBA’s decision to hold the cash rate at 3.85% in July surprised markets, CBA economists expect a 25 basis point cut in August, with another potential move in November. However, the slower pace of monetary easing could temper the pace of spending recovery into late 2025.
