Key Highlights

  • Australian household spending increased just 0.1% in August as consumers continued to face higher living costs.
  • Transport spending rose 2.0%, while insurance and health increased 0.9% and 0.3%, respectively.
  • Essential spending growth reached 4.8% annually, overtaking discretionary spending growth of 3.3%.
  • CommBank expects a 25-basis-point RBA rate increase to 4.60% at the September meeting.

Australian consumers are showing clearer signs of restraint as cost pressures reshape where household budgets are being directed. Household spending increased only 0.1% in August, with essential categories taking a larger share of expenditure while several discretionary areas moved lower.

CommBank Household Spending Insights showed gains in five of 12 spending categories during the month, while another five declined. Transport, insurance and health led the increases, highlighting the growing weight of unavoidable expenses as broader spending growth slows from the pace recorded through late 2025 and early 2026.

Essentials Take the Lead

Transport recorded the largest monthly increase, rising 2.0% in seasonally adjusted terms. Spending at petrol stations climbed 3.4% during August, while annual transport spending growth accelerated from 3.8% in July to 9.0% in August.

Insurance spending increased 0.9% and health spending rose 0.3%, reinforcing the shift toward essential categories. On an annual original basis, essential spending increased 4.8% in the year to August.

Discretionary spending moved in the opposite direction. Annual growth eased to 3.3% after a 0.7% monthly increase in July, while household goods spending declined 0.3% in August.

Consumers Pull Back Across Several Categories

The slowdown was visible across categories including education, motor vehicles, food and beverage goods, and household goods, which recorded the largest monthly declines.

CommBank Head of Australian Economics Belinda Allen said household spending was tracking softer at this time of year compared with previous years, despite recent Volatility in spending indicators and seasonal influences.

The changing mix suggests households are directing more of their budgets toward costs that are difficult to avoid, leaving less room for discretionary purchases.

Fuel Costs Add to Household Pressure

Higher fuel spending has become an important part of the household picture. CommBank noted that the removal of the fuel excise tax cut and renewed tensions in the Middle East were likely contributors to the rise in petrol-station spending.

Transport was the leading spending category both during August and over the previous year. CommBank said Inflation remains too high and households are having to allocate a larger share of their spending to fuel.

The path of oil prices therefore remains relevant for both household budgets and the broader inflation outlook.

Interest Rates Return to the Foreground

CommBank expects the Reserve Bank of Australia to lift the cash rate by 25 basis points to 4.60% at its 28–29 September meeting.

A further increase would add another layer of pressure for Mortgage holders. CommBank said households that kept repayments unchanged after the rate cuts in 2025 could face higher mortgage payments for the first time this year.

The possibility of an additional November increase will depend on upcoming inflation data, developments in the Middle East and the direction of oil prices.

Income and Housing Weigh on the Spending Outlook

CommBank expects slower household income growth to continue weighing on expenditure. Lower housing prices may also reduce the Wealth effect that can influence consumer confidence and spending decisions.

These pressures arrive as discretionary expenditure is already losing momentum. Household goods are one area where CommBank expects consumers to pull back as housing prices and turnover weaken.

That leaves the household sector navigating higher essential costs, softer income growth and the prospect of another increase in borrowing costs.

Sector Context

Household spending is an important indicator for consumer-facing sectors because changes in expenditure can affect retailers, discretionary businesses, financial services and transport-related activity.

A shift toward essentials can change the mix of Revenue across the economy even when overall spending remains positive. Higher interest rates can further influence this pattern by increasing mortgage costs and reducing the amount of Disposable Income available for non-essential purchases.

Risks to Consider

The spending outlook remains sensitive to inflation, oil prices, household income growth and interest rates. A further rise in borrowing costs could increase pressure on mortgage holders, while persistent fuel and essential expenses may continue limiting discretionary spending.

Spending data can also remain volatile from month to month, making the broader trend across several periods important when assessing changes in household behaviour.

What to Watch Next

Attention now turns to the RBA’s September meeting, upcoming inflation figures and the direction of oil prices. These factors will help shape the outlook for borrowing costs and household spending through the coming months.

Further Household Spending Insights will also show whether August’s restrained growth develops into a broader slowdown or whether spending stabilises after recent monthly volatility.

Summary

Australian household spending barely moved in August as essential costs took priority over discretionary purchases. With CommBank expecting another RBA rate increase, pressure on household budgets could remain a central economic theme.