The CommBank Household Spending Insights (HSI) Index rose 0.6% in October, matching September’s lift and marking the thirteenth straight month of growth.

Spending rose in 11 of 12 categories, led by the transport (up 1.2%), motor vehicle (up 1%) and hospitality (up 1%) categories, as Australians continued to spend on filling up the car, looking after their car, eating at restaurants, and ordering takeaway and food delivery.

While household spending appears better, CBA acknowledges that inflation is likely distorting the picture.

“The recent strength in spending is likely being driven partially by price increases rather than purely higher consumption volumes,” says CBA Head of Australian Economics Belinda Allen.

“That’s important because it complicates how we interpret household resilience and how the Reserve Bank of Australia reads the economy as it weighs future interest rate decisions.”

Changes to energy rebates have boosted utility spending over the year, according to CBA, while higher prices and evolving consumer habits are driving growth in digital categories, such as streaming services, online gaming, and mobile data.

“While these patterns suggest households are adjusting to inflation by prioritising essential and at-home entertainment spending, hospitality has also witnessed strong spending growth driven by food delivery and eating out,” says the bank.

Looking ahead

Despite steady spending, CBA says inflation and interest rate uncertainty remain major headwinds for the outlook for household spending.

CBA economists forecast that there will be no further rate cuts in this cycle, and the cash rate will be held at 3.6%. However, consumers could soon rein in discretionary spending if real income growth fails to keep up with prices and savings ratios are wanted to be maintained, says the bank.

“Household resilience has been remarkable,” says Ms Allen. “But sustained inflationary pressure could impact consumer choices going forward.”