Higher bulk-billing rates and earlier sales have driven a sharp decline in spending, which may take some pressure off the Reserve Bank to raise interest rates again.
The RBA hiked the official cash rate for the first time in more than two years earlier this month, citing faster-than-expected growth in private demand pushing the economy out of kilter and causing a resurgence in inflation.
But a 0.4 per cent monthly dip in household spending in December, reported by the Australian Bureau of Statistics on Monday, will help allay fears consumption is gathering steam.
The contraction follows rises in spending of one per cent in November and 1.4 per cent in October.
Sales events bring spending forward
ABS head of business statistics Tom Lay said the fall in December indicated households brought forward spending to take advantage of sales events such as Black Friday in the previous two months.
“We saw high spending in October and November, which had major sales and cultural events boost spending,” he said.
CommBank senior economist Ashwin Clarke said the activity during sales activity pointed to changes in how households were approaching discretionary purchases.
“This may be due to continued value-conscious behaviour following the pandemic or could be an indicator of the new normal in consumer habits,” he said.
Discretionary and essential spending both fall
The falls in expenditure were felt across a range of categories, including discretionary items such as electronics, clothing and furniture, as well as essential items like healthcare, Lay said.
Clothing and footwear spending fell 2.4 per cent, while health spending declined 1.3 per cent, partly due to higher bulk-billing rates reducing out-of-pocket costs for households.
Spending growth slowed from six per cent in the year to November to five per cent over the 12 months to December.
Outlook remains cautious despite resilience
Despite the monthly decline, Oxford Economics Australia lead economist Ben Udy said spending growth was still running at a solid 0.9 per cent quarter-on-quarter.
“Looking ahead, the RBA’s rate hike last week will weigh on spending growth in 2026,” he said. “However, we expect inflation to cool over the course of the year which, along with solid wage growth, should prevent consumers from turning too sour.”
Clarke added that the upcoming data would provide further insight into whether the December slowdown marked a turning point.
“We will release the CommBank Household Spending Insights for January on Friday, which will give us an indicator of how households are faring in the New Year,” he said.
“More data in 2026 will give us further clues.”
