RBA interest rates: Bumper consumer spending a sign of stronger economy

Bumper spending by Western Australia’s consumers helped lift national retail sales but economists worry the boom may push the Reserve Bank to raise rates later this year.

Household spending in WA in November 2025 was up close to 9 per cent on the same month in 2024, according to the Australian Bureau of Statistics.

The State was the top performer as national spending also beat analyst expectations to grow 6.3 per cent, the best performance since mid-2023. Clothes, furniture and major events were at the top of shopping lists in a month that included Black Friday sales.

It followed slightly improved inflation figures released last week which sparked hopes the RBA would hold off on a February rate rise — with markets predicting a one-in-four chance of a hike at the meeting.

The RBA has been cautious in responding to new data under the leadership of governor Michele Bullock and has generally watch trends rather than jumping at volatility.

Yet the fresh spending numbers on Monday were a sign the Reserve will need to move. investment bank UBS still anticipates an interest rate rise by May and EY forecasts a move in the first half of the year.

UBS analyst George Tharenou said the RBA’s next decision will be largely influenced by updated quarterly inflation data due out later this month.

”That said, the consumer has clearly surprised to the upside in recent months; and (Monday’s release) also continued the trend of mostly solid domestic data since the RBA last met,” he said.

“This suggests the risk to our RBA view remains for an earlier rate hike, potentially as soon as the RBA’s next meeting in Feb-26; albeit this still depends on (inflation) and labour market data.”

Also thinking the RBA would need to lift the official cash rate this year was VanEck’s Russel Chesler.

“This strong spending increases the likelihood of inflation bouncing back from its recent fall to 3.4 per cent and will make it more difficult for the RBA to keep rates on hold,” he said.

“Inflation remains elevated, and between government energy rebates rolling off, higher tariffs flowing through to consumer prices, and geopolitical conflicts impacting major supply chains, not to mention the stickiness of services and housing inflation, keeping it on a tight leash this year will not be straightforward.”

Markets had earlier priced in a one-in-four chance of a February hike, down after slightly better inflation data and comments from RBA deputy boss Andrew Hauser last week.

He said inflation in November had come in “broadly in line with our expectations” and for the quarter would probably be “a tiny bit higher” than previously forecast.

Yet Mr Hauser said the RBA would be focused on price movements up to two years in advance — and added that the central bank had forecast inflation returning to target by the end of the year.