After years of financial restraint, Australian households are showing early signs of renewed spending. A combination of tax relief and falling interest rates is helping loosen budgets, with economists noting a potential turning point in the country’s consumption cycle.
While growth remains modest, consumer sentiment appears to be stabilising. Spending patterns across the economy are beginning to reflect the effects of economic stimulus measures introduced in mid-2024, offering a signal that the country’s prolonged cost-of-living strain may be subsiding.
Rate and Tax Relief Driving Consumer Sentiment Shift
The financial landscape for Australian households has shifted notably since mid-2024, when tax cuts and the first signs of interest rate relief were introduced. These changes are now translating into measured increases in household consumption, according to several major banking institutions. The Commonwealth Bank, Westpac, and ANZ have each reported signs of recovery in consumer behaviour, particularly among mortgage holders and renters.
According to Belinda Allen, chief economist at the Commonwealth Bank, “green shoots” are emerging, with the labour market remaining strong and real incomes starting to recover. The bank projects household consumption growth of 2.4 per cent by the second half of 2026.
Data from the Australian Bureau of Statistics (ABS) confirms that household spending rose by 0.4 per cent in the March quarter, following a revised 0.7 per cent gain in the December quarter. Although modest, these increases mark a departure from the stagnation experienced through much of 2023. The March national accounts also showed GDP growth of 0.2 per cent, although households continued to feel pressure, with consumption lagging behind other components.
Major Banks Report Mixed Signals on Recovery Pace
While aggregate data points to an uplift in sentiment, the picture remains uneven across sectors. According to Matthew Hassan, Westpac’s head of Australian macro forecasting, transaction data reflects an uptick in consumer activity, with renters in particular benefitting from easing pressures. However, retail sales continue to rely heavily on discounting strategies, indicating that confidence is not yet fully restored.
The ANZ Bank also cited quarterly improvements in household spending, with its monthly spending indicator growing by 0.7 per cent in real terms in Q2. ANZ attributes the gradual rise to increased public demand and a slight acceleration in household outlays. Nevertheless, economists remain cautious. While further interest rate cuts are being discussed — with the Commonwealth Bank forecasting one additional cut in 2026 — analysts stress the importance of sustained consumer response to underpin any broader recovery.
Ultimately, household consumption remains a pivotal force in the Australian economy, accounting for approximately half of the country’s GDP. Early signs of improvement are encouraging, but economists continue to monitor whether the upturn in sentiment will translate into durable and widespread spending recovery.
