Australia's household spending rose 0.2% in May, after a 1.2% drop in April as discretionary spending held up well, according to the Commonwealth Bank of Australia's (ASX:CBA) Household Spending Insights published Wednesday.

Seven of the 12 spending categories recorded gains in May, with the largest increases in recreation, which rose 2.3%, helped by a lift in travel spending, and hospitality, which climbed 1%.

However, there continue to be signs that household spending in Australia has softened compared with the strong, consistent pace of growth in 2025. Spending is expected to continue to slow through the second half of the year under the weight of weaker household income growth due to higher interest rates and high inflation.

The pace of annual growth slipped to 4.5% in original terms, down from 5.5% in April. Strong base effects are at play, with May having five Sundays, which lowered the rate of annual growth. In seasonally adjusted terms, the annual growth rate reached 5.3%.