Australia’s Household Spending Indicator has shown surprising strength, according to UBS economist George Tharenou. The indicator jumped 6.3 per cent year-on-year in November, marking the fastest pace since June 2023. This figure exceeded both UBS’s and the broader market’s expectations, which had anticipated a 5.5 per cent increase.
On a month-on-month basis, spending rose by 1 per cent, also surpassing forecasts. This follows a 1.4 per cent gain in October, the largest increase since January 2024. The three-month annualised growth of 1.8 per cent remains significantly above its long-term average of approximately 1.2 per cent, signalling a potentially strong shift in consumer behaviour.
UBS continues to project that the Reserve Bank of Australia (RBA) will implement a 25 basis-point rate hike by May 2026, followed by an additional 25 basis-point increase in the third quarter. However, the recent surge in consumer spending introduces the possibility of an earlier rate adjustment.
Tharenou noted, “The consumer has clearly surprised to the upside in recent months, and this also continued the trend of mostly solid domestic data since the RBA last met.” He added that this trend suggests an increased risk of an earlier rate hike, potentially at the RBA’s upcoming meeting in February, though this remains contingent on forthcoming CPI and labour market data.
