Despite a cost-of-living crunch, Australian household spending jumped in late 2025, driven by rate cuts, jobs growth and rising debt.
The RBA’s first 2026 cash rate call hits the market today, and Australians seem to be defying (economic) gravity.
Essential bills are rising, budgets are allegedly tighter than ever, yet somehow…. household spending has also increased? Go figure!
Now we could blame it on the holiday spending, or even the Australian Open (after all, who could pass up some world class tennis?) - but the real question is, how are Aussies affording these luxuries when we’re in a cost of living crisis?
Despite four Australian cities ranking on the world’s most unaffordable cities list, household spending has steadily crept up since mid last year.
The latest numbers in November 2025 revealed a household spending increase of 6.30%, led by strong discretionary spending in clothing, footwear, furnishings, electronics and services like concerts, sporting events, and hospitality.
That’s roughly double the rate of spending as the same time one year ago (3.2% in November 2024).
Spoiler alert: It’s not economic magic. People are spending more because they’re either cutting back on other costs, earning more, or borrowing money. Let’s break it down.
Last year, the RBA began a slow and cautious easing cycle that gave mortgage owners three solid rate cuts. We started 2025 on 4.35% and ended with a cash rate of 3.60%.
Most banks passed on the full rate cuts and variable-rate home loan owners were able to save some cashola from paying less interest on their mortgage.
While some home owners opted to keep the higher repayments and pay down their loan faster, the rate cut was a much needed reprieve for others. The extra cashies might have been redirected towards other essential spending, or ticking off a wishlist item!
The media might have you believing that every 9-5 worker is getting fired and replaced by AI, but falling unemployment rates say otherwise. In December Australia’s unemployment rate fell to 4.1%, which is historically considered low.
More people employed means more people earning an income, and more income inevitably leads to, you guessed it, more spending!
Even if wage growth is stagnating, the fact that people are earning means they can participate in the economy by buying stuff.
Last but not least, Australians are relying more and more on credit card debt. A recent study shows credit card spending surged up 8.6% in 2025, and 44% of Australian credit card holders had a balance that was accruing interest (yikes).
While some Aussies were using debt to get by, others were using it to maintain their lifestyle. It’s one thing to feel the financial squeeze of cossie livs, and it’s another thing to change your financial behaviour for it.
What are your thoughts? Have your spending habits changed much in the past year?
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