Australian Household Spending Surges in November, Defying Forecasts

Australian household spending grew 0.8% in November, surpassing the 0.5% increase expected by economists and marking the strongest monthly gain since June. The figure, released by the national statistics agency, reflects robust demand across discretionary categories such as dining, travel, and durable goods. This resilience comes amid ongoing inflationary pressures and elevated interest rates, suggesting households are maintaining consumption despite higher borrowing costs. The consumption uptick strengthens the case for the Reserve Bank of Australia to maintain its current cash rate of 4.1% for longer than previously anticipated. Strong domestic demand reduces the urgency for rate cuts, which could support the Australian dollar and impact bond markets. The AUD/USD pair rose 0.4% following the release, reflecting improved market confidence in the economy’s underlying strength. Bond yields also reacted, with the 10-year Australian government bond yield (AU10Y) climbing to 4.02%, up from 3.95% prior to the data release. The ASX200 index gained 0.6% as investors adjusted expectations, favoring financial and consumer discretionary stocks that benefit from sustained economic activity. The market now prices in a lower probability of a rate cut before mid-2026, compared to pre-release expectations. The results highlight that household balance sheets remain relatively resilient, supported by strong labor market conditions and wage growth. However, analysts caution that sustained spending could pressure inflation if supply constraints persist, potentially leading to a prolonged period of higher rates.