Quarterly states and territories chart pack: Household spending slows nationally, with growth varying across jurisdictions

In brief:

• National household spending growth moderated in the June quarter due to higher interest rates and elevated costs, as well as ongoing economic uncertainty.
• The Northern Territory recorded the highest annual growth in household spending volumes, followed by Western Australia. The weakest growth was in New South Wales and Victoria.
• Most states and territories recorded strong growth in spending on vehicle purchases, particularly for electric and hybrid cars. Insurance and other financial services also grew strongly across the states.
• Differences across states and territories can be partly attributed to variations in house price performance, capital city inflation, labour market conditions and wage growth. Consumer confidence, however, presents a contrasting picture.
• Consumer sentiment remains weak, with household finances under pressure from higher interest rates and elevated prices, which signal further weakness in spending.

National household spending rose by 1.8 per cent in volume terms over the year to the June quarter, down from 2.4 per cent in March. The moderation reflects the impact of higher interest rates and elevated costs on households, as well as ongoing economic uncertainty. Household spending on electric and hybrid vehicles increased strongly, reflecting a shift in consumer behaviour as households manage higher fuel costs. Elsewhere, discretionary spending was weak.

All states and territories recorded an annual increase in household spending volumes in the June quarter, but conditions differed across jurisdictions. The Northern Territory recorded the highest annual growth in household spending, at 2.6 per cent, followed by Western Australia, at 2.4 per cent. The weakest results were in New South Wales and Victoria, where household spending rose by 1.6 per cent in both states.

Vehicle purchases were the fastest-growing spending category over the year to the June quarter in most states and territories. Insurance and other financial services also grew strongly across the states. All states and territories continued to record a large decline in the cigarettes and tobacco category, partly reflecting an increased share of sales on the black market, which are not captured in the data. Most states and territories also saw a decline in electricity and gas consumption, with New South Wales and Victoria recording the largest falls due to milder winter conditions.

Assessing recent results against long-run averages can help filter out short-term fluctuations in the data. As shown in the following chart, annual household spending growth was below the 10-year pre-pandemic average in most states in the June quarter. Victoria’s consumption growth of 1.6 per cent was nearly half its long-run average growth rate of 3.0 per cent, while growth in New South Wales, at 1.6 per cent, was also much weaker than its long-run average of 2.5 per cent. However, consumption growth was stronger than the long-run average in South Australia, Tasmania and the Northern Territory.

Many factors drive differences in household consumption across Australia. Stronger spending in Western Australia and the Northern Territory may partly reflect wealth effects, with higher house prices supporting household consumption growth. Western Australia and the Northern Territory recorded the highest house price growth of all states and territories over the year to August, at 15.8 per cent and 13.3 per cent, respectively. Western Australia also continues to record the fastest population growth in the nation, with the Northern Territory recording the fourth-fastest growth.

The moderation in household spending in New South Wales and Victoria may reflect annual house price falls of 2.4 per cent and 3.3 per cent, respectively, in August, which act to lower consumption. New South Wales residents are also the most sensitive to interest rate increases, with the state’s average loan size the highest in the nation at just over $841,000.

Household consumption has been supported by the continued resilience of the labour market. However, labour market conditions have gradually eased, with the unemployment rate rising in most states and territories. Tasmania had the highest unemployment rate in July, at 5.1 per cent, followed by Victoria, at 5.0 per cent, in trend terms.

Growth in compensation of employees (COE), a measure of the wages bill, continued to vary across states and territories in the June 2026 quarter. Higher COE growth is usually associated with tighter labour market conditions and supports household spending. The Northern Territory had the highest annual growth in COE, at 9.2 per cent, which may explain some of the strength in household spending. This was followed by South Australia, which recorded a 6.6 per cent increase. The ACT recorded the lowest growth in COE, at 4.0 per cent.

Headline inflation remained above the Reserve Bank’s target band in all capital cities in the June quarter. This led to falls in real wages and household purchasing power. Price growth was highest in Tasmania, at 4.7 per cent in annual terms, followed by South Australia, at 4.4 per cent. Victoria recorded the lowest inflation, at 3.5 per cent, partly due to the state government’s cheaper public transport policy, which is treated as lower urban transport fares in the consumer price index.

Consumer confidence has improved in most states, although it remains near historically low levels, according to Westpac’s Consumer Sentiment Index. While higher confidence is typically associated with stronger household spending, the latest state-level data show the opposite. Confidence is highest in New South Wales and Victoria, despite both states recording the weakest household spending growth in the nation.

Potentially linked to weak confidence, Australians appear dissatisfied with government performance, according to the JWS Trust Issues August 2026 report. Perceptions of state and territory governments have been trending down and are at their lowest level since March 2017. Household spending trends across states may partly reflect recent policy decisions by state governments in managing key issues. JWS found that South Australia and Western Australia scored highest overall among the five largest states. South Australians rated their state government strongly in business and industry, as well as education and training, while the Western Australian Government scored highest among its residents for transport and infrastructure. State government performance on the economy and finances was rated most poorly by residents of New South Wales and Victoria, which may be consistent with weaker household consumption in those states.

The outlook

Inflation pressures remain elevated across the country, with headline inflation above the Reserve Bank’s target band in all states and territories in the June quarter. Real wages have continued to fall, which, combined with negative wealth effects from lower house prices, may constrain household spending. In addition, the Reserve Bank has increased interest rates three times so far this year, with financial markets pricing in at least one further 25-basis-point rise by December. Consumer sentiment remains weak, with household finances under pressure from higher interest rates and elevated prices, including fuel costs. These pressures signal further weakness in spending growth over the year ahead.