Households Spend More as Fuel and Power Savings Free up Cash: CommBank

The report points out that while spending is lifting, it’s not bouncing back as strongly as expected.

Australian $50, $20, $10 and $5 banknotes and dollar coins in Newcastle, Australia, on March 25, 2025. Roni Bintang/Getty Images

Australian households are gradually returning to discretionary spending, with increased activity in dining, entertainment, and travel despite subdued economic conditions, according to new data from the Commonwealth Bank.

The CommBank Household Spending Insights (HSI) Index rose by 0.5 percent in May, reflecting tepid household activity overall.

However, compared to May last year, spending in the Hospitality and Recreation categories has recorded the strongest annual growth, highlighting a shift in consumer priorities.

Lower electricity and petrol costs appear to have freed up household budgets, allowing more spending on non-essential services like food delivery, restaurants, online travel bookings, and cinema visits.

Other segments that recorded monthly increases included Motor Vehicle spending, which rose by 1.5 percent, Household Services by 1.2 percent, and Health by 1.1 percent. In contrast, Utilities and Education saw declines of 1.1 and 0.5 percent, respectively.

Despite an upward trend, Belinda Allen, Senior Economist at CommBank, cautioned that the broader consumer recovery has not matched earlier forecasts.

“The consumer spending rebound is unfolding at a slower rate than we expected, which could be the result of scarring from a loss of real household income post-COVID, and the impact of global uncertainty caused by trade tensions,” she said.

Recent figures from the Australian Bureau of Statistics also reflect a stagnating economy.

GDP grew just 0.2 percent in the March quarter, down from 0.6 percent in the December quarter, with annual growth at only 1.3 percent.

Mortgagors and Renters Outspend Homeowners

Spending behaviour also differed by housing tenure. Households with a mortgage increased their spending by 3.3 percent, while renters lifted theirs by 2.3 percent.

In contrast, Australians who own their homes outright posted a marginal 0.3 percent rise.

“It’s interesting to see the home ownership leaderboard flip in May, as those who own their home outright may be more likely to be concerned about the impact of lower interest rates and market volatility on superannuation balances,” said Allen.

This comes on the back of two rate cuts by the Reserve Bank in 2025. According to Westpac, there is now a 97 percent chance of  Reserve Bank governor Michele Bullock delivering a third cut at the board’s next meeting on July 7–8.

The move would lower the cash rate from 3.85 percent to 3.6 percent.

Businesses Show Resilience, Especially in Mid-Market

Signs of stability are more apparent in the commercial sector.

According to Westpac’s May business report, medium-sized firms with annual turnover between $5 million and $50 million are increasing investment, especially in equipment and capacity, at a rate more than three times the growth in working capital.

“This improvement was supported by the RBA policy rate cut in February, which reduced debt servicing costs by 1.3 percent. It’s a positive sign for businesses as they navigate the economic recovery,” said Shane Howell, General Manager of Commercial Banking at Westpac.

Smaller businesses, or those with turnover under $5 million, still face pressure, though an increasing number are showing signs of stabilised cash flow.

More than three-quarters of industry sectors saw improvement, with recreation, healthcare, and accommodation leading gains. The education sector also posted stronger turnover, lifted by international student enrolments and rising university fees.

Growth Outlook Revised Down Amid Global Headwinds

Despite domestic signs of resilience, broader global dynamics continue to weigh on forecasts.

The Organisation for Economic Co-operation and Development (OECD), in its June update, revised down Australia’s expected GDP growth for 2025 to 1.8 percent, from 1.9 percent in March.

While a slight rebound is forecast for 2026 at 2.2 percent, this remains below the OECD’s December prediction of 2.5 percent.

The OECD stressed the need for structural reforms to lift Australia’s long-term growth, including tackling the housing supply shortage and accelerating emissions reductions.

“Key structural policy priorities are to address the housing affordability crisis by boosting supply and to accelerate progress toward net-zero carbon emissions, especially in transport and industry,” the report said.

It further called for relaxed zoning laws, faster planning processes, and stronger competition policy, referencing agreements made in 2024 between the federal and state governments aimed at cutting regulatory barriers.

Meanwhile, recent tariffs imposed by the US in April have introduced a more uncertain global backdrop. Though the net impact on Australia is expected to be limited, Westpac’s latest market outlook revised GDP growth for 2025 down to 1.9 percent, down from 2.2 percent in February.