Despite downward pressure on incomes and housing prices, Australian households continued to prioritize discretionary spending in July, helping push household spending 0.6% higher over the month, CommBank said in a Friday report.

Discretionary spending growth rose to 0.8% in July from 0.3% in the previous month, likely supported by the football World Cup and the release of The Odyssey movie, the bank said.

The data showed monthly gains across 10 of the 12 categories, led by a 1.2% rise for insurance, 1.1% for recreation, and 1% for hospitality. On the flip side, education posted the largest decline in July, followed by utilities, which was likely due to warmer-than usual weather, CommBank said.

While household spending growth so far in 2026 has been slower than last year, the gap is narrowing. The average monthly increase over 2026 has ticked up slightly to 0.4% compared with the 0.5% increase over 2025, the bank said.

"Our expectation is that spending slows in coming months in line with the lagged impact of rate hikes, the wealth effect and slow household income growth," said Ashwin Clarke, a senior economist at CommBank.

However, he added that the risk remains of spending not slowing as expected. "The pick-up in the pace of growth this month may point to the possibility that weakness in earlier months was temporary, driven by the Middle East conflict."