After more than a year of stubbornly strong spending, Australian households may finally be lifting the foot off the accelerator. New data from the Commonwealth Bank’s Household Spending Insights (HSI) Index shows spending fell 0.5 per cent in February, marking the first monthly decline since September 2024.

The drop comes after 17 straight months of growth and could be an early sign that households are starting to rein things in as cost-of-living pressures and higher interest rates continue to bite.

“Spending has been remarkably resilient over the past year, supported by stronger household incomes. A decline after 17 months of growth is notable and suggests households may be starting to pull back,” said CommBank Head of Australian Economics Belinda Allen.

Cutting back on the fun stuff

Allen says the softening is showing up first in discretionary spending; the nice-to-have stuff rather than the must-haves.

“It’s too early to say whether February marks the start of a sustained slowdown, but we are seeing softer momentum in discretionary categories. That’s typically where households adjust first when budgets come under pressure,” she said.

If you’re looking at your bank balance and deciding maybe the takeaway and weekend splurge can wait, you’re not alone. Over the year, discretionary spending growth has eased to 5.7 per cent, down from 6.6 per cent previously.

Essential spending, meanwhile, ticked up slightly in February.

Power bills lead the spending slump

The biggest monthly drop came from utilities, where spending plunged 6.4 per cent. Education spending also slipped 1.0 per cent in February and is now down 4.0 per cent over the year, making it the weakest-performing category in the index.

Recreation and transport spending also dipped in February, although recreation remains one of the stronger categories over the past year. Not everything went backwards though. Spending on health, household services, food and beverage goods, and communications and digital services all recorded modest increases during the month.

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Mortgage holders still opening their wallets

While spending is down,, households with mortgages are still spending more than other groups. Mortgage holders recorded annual spending growth of 4.0 per cent, compared with 1.6 per cent for renters and 0.8 per cent for outright homeowners.

Education spending appears to be a key dividing line between groups. It dragged down spending for renters and outright homeowners, while making a small positive contribution for households with a mortgage.

Transport costs weighed on spending across all three groups.

Why the Reserve Bank will be watching closely

For economists, the big question is whether this is a one-off dip or the start of a broader slowdown. Allen says the February figures could be an early sign that higher interest rates are finally having the intended effect.

“We have been expecting consumption growth to moderate in 2026 as households contend with higher interest rates, persistent inflation and slower income growth. February’s data may be an early sign that this adjustment is underway,” she said.

She added that softer spending could actually help bring inflation back under control.

“More modest spending growth will help bring the economy back into balance and inflation back towards target, but rising energy prices remain a downside risk for households this year.”

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