Restaurant meals are making inflation worse and adding to risk of a February interest rate rise

Australians are spending big going out this summer during a time of heightened inflation, increasing the risk of an interest rate rise in little more than two weeks’ time.

Whether going out for a beer or a restaurant meal, having a morning cappuccino or ordering on Uber Eats, card transaction data shows consumers this summer prefer to have someone else do the cooking.

During December, spending on hospitality was 24 per cent stronger than the monthly average for December, EFTPOS transaction data from business software company MYOB’s clients showed.

The hospitality sector outperformed the broader economy for the first time in three years, with fewer food services businesses last year going into administration.

“December’s figures mark a shift for Australia’s hospitality businesses and indicate that the sector is gaining momentum,” MYOB chief executive Paul Robson said.

Spending at pubs, taverns, takeaway food and catering was up last month according to Commonwealth Bank credit and debit card data that showed a 7.4 per cent annual increase in hospitality transactions.

Lots of eating out also means the need to lose weight. Spending on recreational activities such as gym memberships and swimming increased 7.9 per cent last year.

Looking good was important with spending on household services, covering haircuts and beauty treatments, seeing an annual spending increase of 9 per cent.

The Reserve Bank of Australia’s three interest rate cuts in February, May and August have also helped Commonwealth borrowers increase their spending in all 12 categories in 2025, covering a range of goods and services.

This has made businesses more inclined to raise prices to cover wage costs, Commonwealth Bank senior economist Ashwin Clarke told The Nightly.

“Part of the reason for the uptick in inflation is that businesses are a bit more comfortable to raise prices because of the strength of demand,” he said.

“The fact that inflation is higher, that’s made the RBA more uncomfortable. They have made it quite clear that it’s very unlikely that rates will decrease this year.

“We expect that they’re going to raise rates at their February meeting to respond to this higher inflation.”

Discretionary spending on non-essential items grew 6.1 per cent in the year ended November 30, Australian Bureau of Statistics household spending data released this week showed.

During the same period, services inflation grew by 3.6 per cent over the year.

“A lot of the recovery in demand is to do with an increase in services spending - they tend to be more linked with wages and overall domestic conditions,” Mr Clarke said.

This was even higher than the overall headline inflation rate of 3.4 per cent, which was above the Reserve Bank of Australia’s 2-3 per cent target.

The Commonwealth Bank, Australia’s biggest home lender, and NAB are expecting the RBA to raise interest rates on February 3, following its next two-day meeting.

During the past month, 34 lenders have increased at least one fixed mortgage rate, a Canstar analysis showed.

Westpac sees rates staying on hold in 2026 but its Melbourne-Institute consumer sentiment barometer for January, released this week, showed two thirds of the 1200 consumers it surveyed were expecting interest rates to rise this year.

This was more than double the share in September 2025.

“Consumers have swiftly recalibrated their interest rate expectations in response to higher inflation and more hawkish rhetoric from the RBA – nearly two thirds of consumers anticipate higher mortgage rates over the coming year,” Westpac economists Ryan Wells and Illiana Jain said on Friday.

The hospitality sector is still second on the insolvency charts, after construction, but last year the number of accommodation and food services companies going into administration fell by 15 per cent, dropping from 1312 to 1122, Australian Securities and Investments Commission data showed.