Australian household spending rebounds in May as consumer confidence slides on economic pessimism

Spending at hotels, cafes and restaurants rose, driven primarily by catering services including restaurant meals, takeaway and dining out.

ANZ-Roy Morgan Consumer Confidence fell 1.2 points to 74.7 in the first week of July, driven by growing pessimism about the near-term economic outlook, even as earlier data showed household spending rebounding in May.

The index sits 13.9 points below the same period a year ago and remains well below its long-run average. Consumer confidence is 3.2 points above the 2026 weekly average of 71.5.

The drop was driven by more Australians expecting bad times for the economy over the next year. Some 40% now hold that view, up 5 percentage points on the previous week, whilst just 7% expect good times.

On personal finances, only 15% of Australians said their families were better off financially than a year ago, down 2 percentage points, whilst 51% said they were worse off. Looking ahead, 40% expect their family will be worse off financially this time next year, up 1 percentage point, whilst 22% expect to be better off.

ANZ economist Sophia Angala said the decline in confidence coincided with the release of the Reserve Bank of Australia's June Monetary Policy Board meeting minutes, which reinforced the board's hawkish stance and the risk of a further rate hike.

"Consumer confidence remains well below its long-run average, pointing to softness in consumer demand over the near term," Angala said. "We expect annual household consumption growth to ease from 2.5% in 2025 to 1.1% in 2026."

Confidence increased marginally in Victoria, Queensland and South Australia but fell more significantly in New South Wales and Western Australia.

The figures follow separate data from the Australian Bureau of Statistics showing household spending rose 1.3% in May, partially reversing a 1.1% fall in April. Spending at hotels, cafes and restaurants rose 1.9%, driven primarily by catering services including restaurant meals, takeaway and dining out. Demand was also supported by sporting and cultural events across Australia, alongside higher catering and hospitality prices.

ABS head of business statistics Tom Lay said the May rise largely reversed what was seen in April, reflecting a lift across all nine spending categories. Annual household spending growth rose to 5.5% compared with May 2025, up from 5.1% in April.

Transport spending rose 1.4% in May after falling 4.7% in April, mostly due to travel-related refunds returning to normal after being significantly elevated due to flight cancellations associated with the Middle East conflict. Excluding air transport spending, total household spending would have risen 0.6%, Lay said.

Clothing and footwear spending rose 2.7%, driven by discounting across mid-season clearance, stocktake and early end-of-financial year sales. Food spending rose 1.1%, reversing an April fall due to higher grocery prices.