Australian household spending tailed as 2025 wound down, notching its first monthly decline since March 2024 with a 0.4% fall in December - a downside surprise on expectations (0.1%). Spending rose strongly through October (1.4%) and November (1%) alongside an extended Black Friday sales period and a busy calendar of major events. That strength in consumer demand - a key factor in the RBA hiking rates at last week's meeting - translated into a 0.9% rise in quarterly volumes.
The ABS's Household Spending Indicator (a high frequency measure of bank card spending) clocked spending declining by 0.4% in December - its first month-on-month fall since March 2024. Spending accelerated in October (1.4%) and November (1%) on the back of growth in discretionary sales (1.8% in October and 1.2% in November) during the Black Friday sales and associated discounting as well as major sporting and cultural events. Discretionary spending then pulled back in December (-0.3%), as illustrated in the chart below, with notable declines seen in furnishing and household equipment (-1.7%), clothing and footwear (-2.4%), and recreation and culture (-0.5%). Hotels, cafes and restaurants (0.5%) were able to resist that pullback.
Household spending in nominal terms lifted by 2.2% across the December quarter - the strongest quarterly rise in 3 years. In real or inflation-adjusted terms, spending saw a 0.9% rise in the December quarter to be up by 2.4% through the year. Strong gains in the quarter were recorded in clothing and footwear (4.1%), furnishing and household equipment (3.6%), and hotels, cafes and restaurants (1.5%).
The 0.9% lift in quarterly volumes is a solid guide to growth in household consumption (HCFE) - the largest component of GDP - in the National Accounts. However, the HSI does not capture the totality of bank card transactions, and it also excludes major items such as rents, electricity, insurance and education.
