The latest household spending figures look soft on the surface. Underneath them are two economies moving in opposite directions, and interest rates are the thing pulling them apart.
Ask almost anyone how their household budget is travelling right now and you will hear a version of the same answer. We are being careful. We are cutting back. We are watching every dollar. Consumer confidence has sat near its lowest in decades for much of this year, and the mood in the room is unmistakably cautious.
And yet inflation has stayed stubborn, and the Reserve Bank has lifted the cash rate to 4.35 per cent while warning it stands ready to lift again. So here is the question worth asking: if we are all spending less, why isn’t inflation budging?
The latest CommBank Household Spending Insights gives us part of the answe[AW1] r, and it is one I have been writing about for a while now. The headline number is soft. Spending rose just 0.3 per cent in June, and annual growth has slowed to 4.8 per cent. But that single figure hides two very different economies moving in opposite directions.
The slowdown is real, but it isn’t landing evenly
Look at how the spending pulls apart by age. Growth among 25 to 34 year olds was the weakest of any group at 4.2 per cent, with 35 to 44 and 45 to 54 year olds just behind at 4.5 per cent each. Younger Australians pulled back hardest of all, with spending growth among 18 to 24 year olds nearly halving over the year. As CommBank’s Belinda Allen noted, these are the groups most likely to hold a mortgage, which makes them the most sensitive to higher rates.
Now look at the other side of the ledger. Australians aged 65 and over recorded the strongest spending growth of anyone, up 10.1 per cent over the year. The 55 to 64 group did not slow down at all. It sped up. Allen’s explanation is worth sitting with, because it is the heart of the matter: shifts in interest rates, inflation and wealth affect age cohorts differently.
Why a rate rise doesn’t land on everyone the same way
Regular readers will recognise this argument, because it is the one I made earlier this year in my article on Why rate hikes may never work to curb inflation quite like they used to. When the Reserve Bank lifts rates, we tend to assume the whole country tightens its belt together. It doesn’t work like that.
For a young family with a large mortgage, higher rates mean higher repayments and less left over at the end of the month. For an older household that owns its home outright and keeps its savings in the bank, higher rates mean the opposite: more interest income, and more to spend. With term deposits paying above 5 per cent, that cohort is effectively being paid to keep spending rather than being squeezed into pulling back. And as the population ages, that insulated group keeps growing.[AW2] In the earlier piece I put a number on that shift: Australians aged 65 and over have risen from around 9 per cent of the population in 1983 to about 16.5 per cent today, roughly 4.3 million people, and the Australian Bureau of Statistics projects that share will reach 22 per cent by 2057.
This is the first reason inflation is proving so hard to shift. The rate lever, the Reserve Bank’s main tool, presses hardest on a shrinking slice of the population while a growing slice barely feels it, or quietly benefits from it. The tool has not changed. The population it is acting on has.
The bills you can’t cut are the ones still rising
There is a second reason it feels like you are spending less and paying more at the same time, and this one has nothing to do with age. It comes down to what you can and cannot cut.
You can skip a restaurant meal. You can delay replacing an appliance. You cannot opt out of your power bill or your insurance renewal. And those are exactly the costs still climbing. Over the past year utilities are up 10.7 per cent, with electricity and gas up around 18 per cent as government rebates wind down, while insurance is up 8.3 per cent. So the spending households are trimming is the discretionary kind, and the prices rising fastest are the essentials nobody can avoid. Cutting back on the extras barely touches them.
What this means if you’re the one feeling it
For the Australians in the squeezed middle, the mortgage holders, the young families and the business owners carrying debt, this is more than an economics curiosity. It means the pressure you are feeling is genuine, it is concentrated on your part of the economy, and it is unlikely to ease simply because the national spending figure looks soft. It also means the old assumption, that rates will fall the moment spending slows, may not hold the way it once did.
If you are carrying a home loan or a business loan through this stretch, the structure of that debt matters more now than it has in years. It is worth making sure it is working as hard as it can for you. The AP Finance team is always happy to talk it through and take a fresh look at where you stand.
Figures in this article are drawn from the CommBank Household Spending Insights, June 2026 report (Belinda Allen and Lucinda Jerogin).
Written by Andrew Whelan, General Manager – AP Group
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About the Author:
When Andrew Whelan is not out pedalling his bike or looking after his two marvellous kids, he’s pedalling through pharmacy finance and strategy development.
Having been with AP Group since the beginning, Andrew has more than a decade experience in pharmacy and is an asset to the sales and finance division. He’s a numbers wizard, people person and sustainability champion — leading AP Group to achieve official Carbon Neutral Certification with Climate Active.
Before AP Group, Andrew spent more than a decade in the telecommunications and media industry including 7 years at Telstra in a variety of senior management roles and 3 years in the United Kingdom managing the commercial function for the British Sky Broadcasting — a time where it was the fastest growing broadband provider in the UK.
So it’s no surprise that he is well equipped to help customers with some of the biggest decisions they will ever make — buying a home or investing in a pharmacy — and helping to show them what’s truly possible.