Australians loosened their purse strings in May, with household spending rising 0.9% as consumers splashed out on new threads and dining experiences, according to the latest Australian Bureau of Statistics data.
The uptick follows a flat April and 0.1% decline in March, suggesting households are regaining confidence despite borrowing costs hikes.
"The rise in May was driven by spending on discretionary goods and services," ABS head of business statistics Robert Ewing said.
"Discretionary spending rose 1.1%, as households spent more on clothing and footwear, new vehicles, and dining out."
The May spending bump hit seven of nine categories, though it wasn't exactly a shopping spree across the board.
Clothing and footwear posted a 3.7% increase, followed by transport at 1.7% and miscellaneous goods and services at 1.3%.
Only alcoholic beverages and tobacco (-1.4%) and food (-0.1%) recorded declines, suggesting households are picking their battles when it comes to where they spend.
"Meanwhile, non-discretionary spending was up 0.5%, rising for the fifth consecutive month," Ewing noted.
The annual picture shows household spending 4.2% higher than in May 2024.
Health expenditure topped the yearly rankings with an 8.4% increase, while miscellaneous goods and services weren't far behind at 8.3%.
Services spending outpaced goods, rising 7.5% year-on-year compared to 1.5% for goods purchases.
Spending gains were universal across states and territories, though some clearly had more fun than others.
The Northern Territory recorded the strongest monthly growth at 1.2%, with Queensland and Western Australia both posting 1% advances.
ABS data arrives as the Reserve Bank of Australia plays an increasingly tricky balancing act between supporting economic growth and keeping inflation from rearing its head again.
The central bank recently cut the cash rate to 3.85%, citing inflation's return to the 2-3% target band and global economic uncertainty that's keeping everyone guessing.
Reserve Bank's reservations
However, the RBA isn't exactly popping champagne corks over the consumption outlook.
In its latest Statement on Monetary Policy, the central bank noted that "growth in household consumption in early 2025 appears a little weaker than expected" and warned that the pickup could be "even slower" than anticipated.
Spending resilience comes despite ongoing financial stress hitting households.
Real household incomes only recently turned positive after 18 months of decline, and debt-service payments remain elevated as a share of household income.
Yet consumers appear increasingly confident about the economic trajectory - or at least willing to bet their credit cards on it.
Latest inflation data shows headline CPI at 2.4% annually - its lowest level in four years - while the unemployment rate holds steady at 4.1%.
The May spending data also marks a milestone for the ABS indicator itself.
Ewing confirmed the Monthly Household Spending Indicator is "no longer an experimental indicator" and will become the primary source of monthly household spending data when the Retail Trade publication ends on 31 July 2025.
For policymakers, the spending uptick provides a signal that monetary policy transmission is working, though whether it's working fast enough remains a question.
Data suggests Australian households remain willing to open their wallets when conditions improve, even if they're more selective about where those dollars end up.
Whether this consumption momentum can be sustained through to the end of 2025 may well determine how aggressive the RBA gets with further rate cuts.
