Australian Household Spending Defies Rate Hike Fears, Fuels Rate Bets

Australia's household spending continued its solid run in July, rising for the third straight month as consumers splurged on recreation, food, and health. According to data from the Australian Bureau of Statistics, the monthly household spending indicator (MHSI) rose 1.1% in July to A$82.34 billion ($59.13 billion). This increase was higher than analysts had expected after a solid 1% rise in June.

The annual pace of spending growth picked up to 7% in July, the highest since June 2023. Recreation and cultural spending rose 1.5%, boosted by increased gambling activities, major sporting events, and cinema attendance. Spending on clothing and footwear also increased, rising 1.6%, while furnishing and household equipment registered a small 0.4% increase.

Harry McAuley, an economist with Oxford Economics Australia, said the ongoing strength in household spending will be cause for concern for the Reserve Bank of Australia (RBA). He noted that today's strong spending growth and yesterday's stubborn underlying inflation print will do very little to improve the mood. The RBA has raised interest rates three times this year to 4.35% to fight inflation, fully reversing the amount of policy easing it made in 2025.