Household spending bounces – but sentiment tells a different story

Australian household spending rose 1.3% in May, per the ABS Monthly Household Spending Indicator. The report, published by Westpac Economics on 25 June 2026, showed annual growth strengthening to 5.5%. This beat Westpac’s forecast of 0.7% and the market consensus of 0.5%.

But the stronger monthly result masks a more cautious picture brokers need to understand.

Consumer sentiment fell further in June, according to the Westpac–Melbourne Institute Consumer Sentiment Index. It declined from already historically low levels.

Cost-of-living pressures remain the dominant household concern.

That combination – household spending up, confidence down – matters for brokers advising clients on affordability and timing.

All nine household spending categories recorded gains

The May rebound was broad-based, with all nine ABS categories recording gains.

Clothing and footwear led, rising 2.7% in the month. The ABS attributed the result to base effects from April sales events.

Miscellaneous goods and services rose 2.2%. Hotels, cafes and restaurants gained 1.9%. Restaurant meals, dining out, and sporting and cultural events drove the increase.

Transport spending rose 1.4% after April’s sharp fall. The ABS noted the result reflected travel-related refunds normalising. Flight cancellations in April had elevated them significantly.

Services led the broad-category breakdown, rising 2.6% for the month. Goods spending rose a modest 0.1%.

Discretionary spending outperformed, gaining 2.1%. Non-discretionary spending edged lower, falling 0.2%.

State-by-state household spending results

State results were broadly positive. All jurisdictions except Tasmania recorded gains.

Western Australia outperformed with a 2.6% monthly rise, its strongest result since 2022. Victoria rose 1.7%, South Australia 1.6%, Queensland 1.1%, and New South Wales 0.7%. Tasmania fell 0.5%.

Westpac’s DataX Card Tracker had flagged WA’s non-fuel spending as a regional standout.

What brokers should watch

Excluding fuel, Westpac–DataX Card Tracker data shows activity eased through to end-May.

That slowdown, combined with declining sentiment, suggests clients may be spending, but not willingly. Cost-of-living pressure is driving a portion of that activity, not discretionary confidence.

For brokers, this has two practical implications.

First, declared living expenses on loan applications may be rising. Clients who underestimate actual household spending on their loan applications face higher serviceability risk. That has already led to loan declines in recent months.

Second, the sentiment decline reinforces a cautious borrower mindset. As Australian consumers remain deeply pessimistic despite the spending rebound, pipeline conversations may take longer to convert.

Westpac economist Luka Belobrajdic says the outlook for household spending remains soft heading into the second half of 2026. The April fuel shock that hit household budgets earlier this year showed how quickly a single month’s disruption can distort the picture.

Card activity data and sentiment both point to softer household spending ahead, not acceleration. That context is worth having before the next client conversation about borrowing capacity.