Quarterly states and territories chart pack: Household spending unequal across states and territories

In brief

• National household spending growth strengthened in the December quarter due to the robust labour market, 2025 interest rate cuts and the wealth effect mainly from house price gains.
• Western Australia continues to record the highest annual growth in household spending volumes, followed by Queensland. While Victoria had led the nation in household spending growth prior to the pandemic, Western Australia has now taken its place. The weakest growth was in the Australian Capital Territory (ACT).
• All states and territories recorded strong growth in spending on furnishings and household equipment, while recreation and culture also contributed strongly, as major sales and cultural events boosted spending towards the end of the year.
• The impact of inflation on real wages and higher interest rates is expected to weigh on the recovery in household spending volumes over the next year, as indicated by the recent fall in consumer sentiment.
  

National household spending rose by 2.4 per cent in volumes terms over the year to the December quarter, which was the largest increase since June 2023. Recent strength in household spending growth reflects the strong labour market, interest rate cuts throughout 2025 and the wealth effect, mainly from house price gains. Despite real wages, as measured by the Wage Price Index, falling in the December quarter, growth in broader measures of average earnings reported in the National Accounts have been stronger. This reflects the impact of employees switching to higher paying jobs, as well as bonuses and other payments, and has supported the recovery in household spending. In addition, promotional activity was prevalent in the December quarter, encouraging more spending.

The pick up in spending has increased significantly faster than the Reserve Bank expected and was a key reason behind the decision to increase interest rates by 25 basis points earlier this month.

The increase has not been consistent across the population. Recent data from Commonwealth Bank showed that annual growth in nominal discretionary spending over the year to the December quarter was highest for the 55 to 64 years age group, which grew by 5.0 per cent, followed by the 65 years and older age group which increased by 4.6 per cent. The strength in spending for these older age groups could reflect the significant rise in superannuation benefit payments, which has increased by 56.1 per cent over the last three years, and can be used for major purchases or increased spending on travel. Conversely, the 25 to 34 years age group recorded the lowest growth in discretionary spending, increasing by just 2.1 per cent.

All states and territories recorded an increase in household spending volumes in the December quarter compared to a year earlier. Western Australia recorded the fastest annual growth in household spending, at 4.5 per cent, and has consistently had the highest growth rate of all states and territories since June 2023. Queensland had the second highest growth rate, at 3.4 per cent. This may reflect the wealth effect, with higher house prices translating to an uplift in household consumption growth. Both Western Australia and Queensland recorded the highest house price growth of all states and territories (excluding the Northern Territory) over the year to January. Perth property prices increased by 18.5 per cent and Brisbane by 15.7 per cent. Notwithstanding the moderation in population growth across the nation, Western Australia has continued to record the fastest increase in population, with Queensland third fastest. The weakest household spending result was in the ACT, where it rose by 0.9 per cent.

Furnishings and household equipment was the fastest growing spending category over the year to the December quarter in all states and territories, except the ACT. Recreation and culture also contributed strongly in most states reflecting major sales and cultural events. All states continued to see a decrease in the alcoholic beverages and tobacco category, due mainly to an increase in the sale of cigarettes on the black market, which are not captured in the data. Changing habits for alcohol consumption also contributed to the decrease. Hotels, cafes and restaurants also recorded relatively weak growth across most states and territories.

New South Wales (NSW) real household spending increased 1.7 per cent through the year to December 2025 quarter. Furnishings and household equipment recorded the largest rise, increasing by 6.2 per cent in annual terms, followed by miscellaneous goods and services, which grew by 3.7 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on health, which rose by 1.9 per cent in the quarter on an annual basis. According to Westpac, consumer sentiment in NSW is the highest in the nation, although it has worsened in recent months, which could be a sign that households may slow growth in spending over the next year.

Victoria’s real household spending grew by 1.4 per cent over the year to December 2025 quarter. Household spending on furnishings and household equipment grew the most, with a rise of 5.1 per cent in annual terms. Excluding alcoholic beverages and tobacco, the weakest spending growth was on hotels, cafes and restaurants, which increased by 0.6 per cent over the year. Victoria’s consumer sentiment index is the second highest in the nation, despite easing over recent months.

Queensland recorded a year-on-year increase in real household spending of 3.4 per cent in December 2025 quarter, the second highest in the nation. Despite recording a 1.8 per cent fall in real wages, the weakest of all states and territories, spending growth has been supported by the wealth effect from higher house prices which increased by 15.7 per cent over the year to January. Spending on furnishings and household equipment increased the most, growing by 6.9 per cent in annual terms. Recreation and culture also recorded strong growth of 4.8 per cent, partly due to major events including the Ashes cricket test series during summer. Queensland’s consumer sentiment index has fallen in recent months and is the second lowest in the nation.

Western Australia saw the strongest annual increase in real household spending of all states and territories at 4.5 per cent through the year to December 2025 quarter, and has consistently exceeded all states and territories since June 2023. Spending on furnishings and household equipment increased the most, growing by 9.2 per cent in annual terms, followed by recreation and culture which grew by 8.3 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on health, which rose by 3.7 per cent in the quarter on an annual basis. Western Australia’s consumer sentiment index fell slightly in February, close to the average of other states.

South Australia’s real household spending experienced growth of 2.9 per cent over the year to December 2025 quarter, the third strongest increase of all states and territories. Spending on furnishings and household equipment increased the most, growing by 7.0 per cent on an annual basis, follow by health, which grew by 6.4 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on hotels, cafes and restaurants, which increased by 1.1 per cent over the year. Consumer sentiment in South Australia has fallen slightly in recent months and was below the national average in February.

Tasmania’s real household spending rose 1.3 per cent through the year to December 2025 quarter, the second lowest of all states and territories. Weak spending growth reflects the lowest population growth in the nation, and a 0.5 per cent fall in real wages over the year to December. Furnishings and household equipment recorded the largest increase in household spending, growing by 6.0 per cent on an annual basis. This was followed by health, which grew by 5.8 per cent, and transport, which grew by 5.5 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on hotels, cafes and restaurants, which increased by 1.4 per cent over the year. Tasmania’s consumer sentiment has fallen sharply in recent months and was the lowest of all the states in February.

The Northern Territory’s real household spending grew by 2.7 per cent through the year to December 2025 quarter, which was above the national average despite recording the lowest increase in wages growth of all states and territories over the year to December at 2.2 per cent. Spending on furnishings and household equipment increased the most, growing by a strong 8.6 per cent in annual terms, followed by food which recorded growth of 6.0 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on health, which increased by 0.9 per cent over the year.

The ACT recorded real household spending growth of 0.9 per cent in the December quarter in annual terms, the lowest of all states and territories. This was despite the ACT recording the highest growth in real wages in the nation over the year to December. Health recorded the strongest growth, increasing by 6.6 per cent through the year to the December quarter. Households also increased their spending on furnishings and household equipment, which recorded growth of 4.1 per cent. Excluding alcoholic beverages and tobacco, the weakest spending growth was on transport, which fell by 2.3 per cent over the year.

The outlook

Labour market conditions have stabilised in recent months and remain tight, with the unemployment rate in most states and territories at low levels. Higher broader measures of average earnings, combined with wealth effects from higher house prices, are expected to support the recovery in household spending over the next year. However, inflation has picked up across the country as greater momentum in demand leads to capacity pressures. The Reserve Bank increased interest rates in February and at least one further rise of 25 basis points is priced in by financial markets this year. Consumer sentiment has fallen sharply since December 2025, reflecting the impact of higher inflation and interest rate expectations, and is now back to where it was a year ago, potentially dampening the recovery in spending growth.

National Accounts data for the December quarter (to be released on 4 March) will provide further insights into the nature of the pick up in household consumption towards the end of last year.