Australian Household Spending Beats Forecasts for Second Straight Month

Australia's household spending rose more strongly than expected for a second consecutive month in June, adding to evidence that consumer demand is holding up despite the Reserve Bank of Australia having already delivered three interest rate hikes this year.

Data from the Australian Bureau of Statistics showed the monthly household spending indicator rose 0.8% in June to A$81.3 billion, comfortably beating analyst expectations of a 0.2% increase. The June result followed an even sharper 1.2% jump in May, meaning spending has now surprised to the upside for two straight months.

The ABS attributed the gain to strength in discretionary spending categories, including alcoholic beverages and tobacco, recreation and culture, furnishing and household equipment, and hotels, cafes, and restaurants. Consumers were also reported to be spending heavily on electric vehicles, a trend linked in part to persistently high petrol prices pushing households toward alternatives.

The resilience in spending comes against a backdrop of a hawkish policy environment, with the RBA having raised interest rates at each of its first three meetings this year. Despite those hikes, the labour market has continued to hold up reasonably well, giving the central bank some room to keep tightening without an immediate deterioration in employment conditions.