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The lingering cost-of-living crisis appears to be waning, according to Australia's leading banks, which indicates that mortgage holders are finding much-needed financial respite. This change is catalysing an uptick in consumer spending—a hopeful sign for both individuals and the broader economic landscape.
The resurgence in household spending is a boon for the Australian economy, which has lagged behind its global counterparts. Household consumption constitutes approximately 50% of Australia's GDP, and any resurgence in spending could significantly boost economic performance. While March's quarter showed a modest 0.4% rise in household expenditure, a more substantial increase is anticipated as the impacts of rate relief and tax cuts continue to unfold.
According to the Commonwealth Bank, household consumption is projected to grow by 2.4% by the latter half of 2026. This positive trend is further supported by ANZ's research, which forecasts an uptick in GDP growth driven by rising consumer spending and increased public demand.
Nevertheless, while transaction data from Westpac shows encouraging signs, the bank maintains that broader consumer recovery still hinges on sustained sentiment improvements and potential further interest rate relief.
All eyes are on the forthcoming months as financial experts anticipate further interest rate adjustments, with relief potentially coming as soon as November. These prospective measures are expected to provide additional momentum for consumer spending and economic revitalisation.
While Commonwealth Bank predicts at least one more rate cut in 2026, it warns that insufficient consumer response or unexpected downturns in the labour market could necessitate additional intervention. The bank's outlook is optimistic, pointing towards further growth in consumer activity, which in turn may help businesses mitigate inflationary pressures by extending cost efficiencies to consumers.
As Australians regain confidence in their financial stability, ongoing economic developments will be crucial in determining the trajectory of spending trends and overall economic health.
Published:Monday, 25th Aug 2025
Source: Paige Estritori
