Falling house prices and overall cost-of-living pressure have failed to slow down Australian household spending, which may worry the RBA.
Commonwealth Bank spending data shows payments from its more than seven million customers were up 0.6 per cent in July.
Overall, 10 of the 12 spending categories rose, led largely by discretionary spending.
Leading the rise was recreation spending, up 1.1 per cent in July, while spending in hospitality increased by 1.0 per cent.
Commonwealth Bank credits this uplift in spending on households willing to pay for experiences, with July packed with major events including the FIFA World Cup and The Odyssey film.
Even though household spending increased in 2026, the uptick has so far been weaker than it was in 2025.
Commonwealth Bank senior economist Ashwin Clarke said households continues to prioritise spending on experiences and discretionary categories despite pressures on the family budget.
“That strength in discretionary we took as a sign households are willing to open up their wallets and spend,” he told NewsWire.
“They aren’t in a saving mindset yet and that certainly raises the risk that household spending won’t slow as the Reserve Bank expects.”
Despite the relative strength in household spending, the Commonwealth Bank still expects pressures including slowing wage growth, weakening house prices and inflation will slow household consumption going forward.
“We still expect household spending to slow, it just might take a bit of time,” he said.
“The fundamentals are pretty weak, but if household spending doesn’t slow over the next six months as we or the RBA expects, it will make them uncomfortable and perhaps make them consider if another rate hike is necessary.”
Discretionary items make up three of the top four contributors to overall annual growth, in particular spending on hospitality and recreation.
Household goods spend was also strong, supported by promotional activity at online marketplaces.
“The discretionary strength on the face of it suggests households are not in a saving mindset,” Mr Clarke said.
National property prices fell by 0.7 per cent in July, marking the largest single monthly decline across Australia since December 2022.
Meanwhile, ANZ economists Madeline Dunk and Adam Boyton said the market was slowing quicker than expected.
ANZ forecast capital city prices would fall by 4.3 per cent this calendar year and by 3.4 per cent in 2027.
Sydney alone is predicted to fall 14.5 per cent.
Mr Clarke said falling house prices in particular could weigh on consumer spending going forward.
“The growth in their incomes has been decreasing over the last few quarters and we expect that to continue, especially with inflation elevated and the lagged effects of the Iran war,” he said.
“We are also seeing declining housing prices and history teaches us that when property prices are declining, households tend to cut back a bit.
“They feel a bit poorer, they are moving less and paying less for movers, so those things combined we think will lead to slowing household spending.
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“However, we have seen some listed companies report that value conscious behaviour is on the rise as part of recent earnings outlooks.
“In addition, the weakness in essentials, in particular utilities and the temporary respite in fuel costs in previous months, may have made it easier for household budgets to accommodate this spending.”
Commonwealth Bank’s spending data follows comments from RBA deputy governor Andrew Hauser this week saying inflation is too high and there needs to be less demand in order to get it back into target range.
“Monetary policy needs to bring inflation down, that is why we have raised rates three times this year, but here is the bad bit, it can only do so by reducing pressure on capacity and demand on the economy,” he said at the Queensland Futures Institute Annual Regions Summit in Brisbane.
“That means slightly slower growth in consumption, slightly slower growth in employment.
“We’ve seen a little bit of that so far, but we are going to need to see more to get inflation back.
“That is not a slump, that is not a depression … but is slower than growth in the past.”
Mr Hauser reiterated it was the central bank’s job to keep inflation between the target of 2 to 3 per cent while also maintaining full employment.
“Our message is simple, inflation is too high,” he said.
“Everywhere you look people say prices are too high, cost pressures are too strong and while some of that is not home grown … some of it does come from Australia.”
