Falling home prices start to weigh on Australian household spending: CBA
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The news: Spending by Australian households returned to modest growth in May despite cost of living pressures, but falling home prices are beginning to weigh on spending, the Commonwealth Bank said.
The numbers: The bank’s Household Spending Insights Index, drawn from de-identified payments data of 7 million retail customers, lifted 0.2% following a fall in April and came as Australians spent more on travel and events, the bank said.
The index showed gains across seven of the 12 categories, led by recreation, which rose 2.3%, and hospitality, up 1.0%, supported by sporting events including State of Origin and a recovery in travel. Spending on online travel bookings rose 12.4% in the month.
“Falling home prices are emerging as a new weight on spending,” the report says.
The report shows a shift in spending by home ownership status. Those with a mortgage are showing signs of slowing in the latest data after outperforming over the past year or so, while renters recorded the fastest pace of growth, and owner outrights continued to record the softest pace of spending growth per capita.
While the bank singled out softening property values as a fresh drag on budgets, it also said the so-called “wealth effect” from housing had yet to show up in household spending habits. That is spending categories RBA research suggests are most affected, such as furnishings and household equipment and clothing and footwear, had so far not been impacted.
Annual spending growth printed at 4.5%, but CBA economists expect spending to slow through the second half of 2026 under the weight of weaker household income growth.
What they said: “While higher interest rates and inflation are weighing on households, consumers were willing to spend on experiences like travel, dining and events during the month of May,” CommBank head of Australian economics Belinda Allen said.
Allen added the bank expects the RBA to remain on hold for the remainder of 2026 and forecasts two rate cuts in 2027.
The source: Commonwealth Bank
