A slight uptick in household spending last month is not enough to assuage concerns over the year ahead.
The latest CommBank Household Spending Insights (HSI) Index shows spending rose 0.5 per cent in January 2025, marking 16 consecutive months of growth.
Annual spending growth eased slightly to 5.6 per cent, following a strong finish to 2025.
“We’ve now seen consistent monthly spending growth for well over a year, which points to steady underlying demand across the economy,” CBA Senior Economist Ashwin Clarke said.
“While consumers have continued to spend, higher interest rates and easing income growth are likely to slow that momentum as the year progresses.”
Recreation was one of the strongest-performing spending categories in January, rising 1 per cent in the month and sitting 7.6 per cent higher over the year, according to HSI research.
Consumers splashed out on tickets, travel and fitness, with major events including the Australian Open tennis and summer festivals drawing strong crowds. Spending rose across ticketing services, tourist attractions and travel agencies, reflecting households’ continued appetite for summer experiences.
There was also a rebound in household goods spending, with strong demand in fashion and jewellery. HSI research shows spending in household goods was up 0.5 per cent, suggesting that consumers’ willingness to spend extended beyond seasonal discount periods like Black Friday, with strength across clothing, hardware and online marketplaces.
The annual original rate of growth accelerated from 3.7 per cent in December to 5.3 per cent in January.
Within the overall spending lift, a large chunk of growth was driven by utilities, which recorded the largest monthly increase across categories, lifting 3.7 per cent in January, following another strong lift in December.
According to CommBank, the jump reflects the scaling back of federal energy rebates, with households facing higher electricity bills as subsidies expired. Over the year, utilities spending is up 15.6 per cent, with outlays on electricity and gas driving the bulk of the increase.
Alongside jumps in spending, Australia’s wages growth held steady in January, with CBA data showing quarterly wage growth at 0.8 per cent and annual growth at 3.1 per cent. Overall, wages have been tracking broadly sideways, though there has been a gradual lift in quarterly outcomes since mid-2025.
Western Australia continued to report the strongest wage gains, while outcomes across the eastern states remained steady.
“While wage growth is firm but not excessive, weak productivity growth means businesses continue to face elevated labour cost pressures,” CommBank economist Harry Ottley said. “This underpins our assessment that labour market conditions remain tight and are still contributing to inflation.”
CBA’s Clarke said the early-2026 momentum reflected strong household fundamentals. But cautioned that economic conditions are likely to tighten.
“Households have been supported by a solid labour market and healthy balance sheets, but higher interest rates and easing wage growth are expected to slow spending as the year progresses,” Clarke said.
The January data predates the Reserve Bank of Australia’s February rate increase, and CBA economists expect the RBA to increase rates again in May 2025. Rising mortgage payments, moderating income growth and persistent cost-of-living pressures are all expected to dampen spending growth over time.
While consumers began 2026 on the front foot, the pace of spending is likely to moderate as those headwinds build, Clarke said.