Australia’s household spending continued its upward trend in January, marking the fourth consecutive month of growth, according to new data from the Australian Bureau of Statistics (ABS). However, while spending increased by 0.4% from December, the annual growth rate slowed to 2.9%, down from 4.2% in the previous month.
As reported by Reuters, this shift indicates that consumers are becoming more cautious, with spending habits changing significantly. While purchases of goods declined, there was a sharp increase in services-related spending, particularly in healthcare, air travel, and recreation. The shift reflects a post-holiday adjustment, with many consumers having already taken advantage of retail discounts from Black Friday and holiday sales in late 2024.
Consumers Shift Focus From Goods to Services
The ABS Monthly Household Spending Indicator (MHSI) revealed that the biggest driver of growth in January was the services sector, which saw a 1.5% rise. This contrasts with declining spending on goods, suggesting that Australians are prioritizing experiences and essential services over material purchases.
Robert Ewing, head of business statistics at the ABS, explained the shift:
“A 1.5% rise for services drove the January growth. This came as households spent more on health services, air travel, and sports and physical recreation services.”
This data signals a potential long-term trend, as inflation and economic conditions continue to shape consumer behavior. People may be cutting back on discretionary goods purchases while still investing in travel, wellness, and fitness-related activities.
Why This Data Matters – A New Consumer Spending Measure
One of the biggest takeaways from the new report is that the MHSI will soon replace the traditional retail sales report, offering a more comprehensive view of how Australians are spending their money.
Starting in July 2025, the MHSI will cover 68% of all household consumption, more than double the scope of the current retail sales survey. This means that future economic reports will provide a clearer picture of how spending patterns are evolving, particularly as the country navigates inflation, interest rate changes, and shifting consumer priorities.
The slowdown in annual spending growth may indicate greater financial caution, but it also highlights changing priorities, with experiential spending and essential services taking precedence over non-essential goods.
As 2025 progresses, economists and policymakers will be watching closely to see whether this shift continues or if spending habits adjust once again in response to economic conditions.
