Christmas spending soars as younger households ignore belt-tightening

Australian household spending will soar over the festive period, despite rising inflation and cost-of-living pressures still weighing on the family budget.

New survey data released by MLC exclusively for NewsWire shows the average Australian household is expecting to spend a whopping $1712 over the festive period.

The bulk of increase in household spending will come from those aged below 45.

More than 80 per cent of those aged between 18-30 will either maintain or increase their consumer spending over the holiday period, while 71 per cent of surveyed households aged 31-45 will maintain or lift their spending.

Just 26 per cent of those aged 61-79 will spend more, while 39 per cent are looking to cut back their discretionary spending over the holiday period.

Males across all age groups are tipped to spend more than females.

MLC senior economist Bob Cunneen says the boost in consumer spending from younger Australians is an encouraging sign after confronting cost-of-living challenges over the past three years.

“Consumer spending has been improving over recent months given the Reserve Bank’s three interest rate cuts has boosted disposable income,” he told NewsWire.

“Given this positive tone to recent consumer spending, there is a chance that the Reserve Bank may reverse course and even raise interest rates in 2026.

Despite the risks Mr Cunneen forecasts the RBA will continue to hold interest rates in the new year.

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Commonwealth Bank head of Australian economics Belinda Allen forecasts interest rates will rise when the RBA meets in February due to increasing consumer spending over the last 12-months leading to the economy nearing full capacity.

If an economy reaches full capacity it usually leads to higher inflation.

“The economy has picked up more momentum than expected, and that strength is keeping inflation from easing. A small rate increase in February would guide inflation back toward the RBA’s target range of 2-3 per cent,” Ms Allen said.

The Australian Bureau of Statistics data shows the inflation rate for October remains unchanged at zero per cent.

However, due to the -0.2 per cent figure in October last year, Australia’s yearly inflation rate has now jumped to 3.8 per cent.

Ms Allen’s comments came ahead of any Christmas spending after surging spending in November on major events including Metallica, Oasis and The Ashes.

She says consumers are in a stronger position compared to last year.

“Over the course of 2022-2024 the pattern was people would sacrifice (ahead of big purchase items) with the cost of living,” Ms Allen said.

“(But) 2025 has looked very different — we’ve seen very consistent spending growth as we haven’t seen strong months and then weak months in spending patterns.”

Judo Bank chief economic adviser Warren Hogan says interest rates need to reverse course and rise in February, March and May.

If he is correct all three cash rates in 2025 would be reversed as the cash rate goes back up to 4.35 per cent.

“The RBA Governor assured us that the Monetary Policy Board takes this inflation resurgence seriously. That’s good news,” he wrote for The Daily Telegraph.

“The bad news is this means a short sharp increase in the RBA cash rate, and hence mortgage interest rates, will likely be required over the first few months of 2026.”

Although Mr Hogan points to government spending adding to inflationary pressures over consumer spending.

MLC finance expert Jenneke Mills says the Australian economy has experienced both consumer and investment spending over the last few months.

“Australians are showing resilience and optimism by choosing to celebrate despite financial challenges. While optimism is welcome, it’s important to understand the impact of spending on long-term financial wellbeing,” she said.

“The key is to enjoy the season without compromising long-term financial health.”