SYDNEY, March 5 (Reuters) – Australian household spending bounced in January but that was not enough to offset the previous month’s fall as consumers stayed cautious with rate hikes looming, data showed on Thursday.
Data from the Australian Bureau of Statistics showed its monthly household spending indicator (MHSI) rose in January to A$78.98 billion. Analysts had generally looked for a rise of around 0.4%, following a 0.5% fall in December.
The annual pace of spending growth slowed to 4.6%, the lowest since May last year, from 5% in December.
“Following exceptional growth in Q4, consumers tightened their belts at the start of 2026,” said Harry McAuley, economist for Oxford Economics Australia, adding that households prioritised essentials such as medical visits and vehicle servicing over retail shopping and travel.
“We expect to see the impact of the latest rate hike beginning to flow through in the February and March MHSI prints.”
The still patchy recovery in consumer spending is one reason that markets bet the Reserve Bank of Australia would leave rates steady at 3.85% this month, having hiked just in February to reverse one of the three cuts last year as inflation surged.
The economy expanded at a solid pace of 0.8% last quarter, lifting annual growth to 2.6%, the highest in almost three years. That was way above the economy’s potential growth rate of 2%, but masked some weakness in consumer spending.
Still, with headline inflation running at 3.8%, above the target band of 2% to 3%, while the jobless rate stayed low at 4.1%, markets are fully pricing in a rate hike in May.
Thursday’s data showed spending on goods fell 0.3% as consumers pulled back on buying motor vehicles, while spending on services rose 1%, driven by offerings such as digital streaming.
Discretionary spending was just up 0.1% in the month.
(Reporting by Stella Qiu; Editing by Christopher Cushing and Stephen Coates)
Comments