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This article is general information only and does not constitute financial or legal advice. For your specific situation, consult a qualified financial adviser or accountant.
Five years after the pandemic first hit, the average Australian household still has around 1 per cent less real disposable income per person than before COVID-19, according to the Reserve Bank of Australia. That single figure explains a lot about why the way people spend money has shifted so dramatically — and why many of those changes look permanent. Here’s what you actually need to know.
What stands out is the split between income and wealth. People feel poorer in their pay packets but richer on paper because property and superannuation balances surged. That tension — less cash coming in, more tied up in assets — has reshaped what households prioritise. The spending patterns that emerged during lockdowns didn’t just snap back when restrictions ended. Many of them stuck around, and some have deepened. If you run a business, invest, or just want to understand where your own money is going, the data tells a clear story about what Australians now value.
I’ve been watching these shifts since early 2020, and the pattern that keeps surprising me is how quietly some categories have changed. Pet spending now outweighs beef and sausages in the average household budget. That’s not a lockdown quirk — it’s a structural shift. The same goes for how much people spend on eating at home versus eating out, and how they get from one place to another. Let’s walk through what actually changed, what didn’t, and what it means for the next few years. For a broader look at how businesses are adapting, you might find this piece on adapting to changing customer needs useful.
Four Lasting Shifts in How Australians Spend
The core concept here is the inflation basket — the set of goods and services the Australian Bureau of Statistics uses to measure price changes. When the weights in that basket shift, it tells you what people are actually buying more or less of. The pandemic forced a massive reweighting, and the new weights have held.
What I’d say is this: if you’re still assuming Australians spend like they did in 2019, you’re working with the wrong map. The basket has been redrawn. A business that sells pet products, home coffee equipment, or car accessories is in a different position than one that relies on public-transport commuters or formal wear. The question is whether your category gained or lost weight.
Why Income Squeeze and Wealth Surge Pull Spending in Opposite Directions
Here’s the tension that explains most of what’s happened. Real household disposable income per person is about 1 per cent lower than before the pandemic, according to the RBA. Labour income has grown over five years, but that gain has been more than wiped out by higher interest rates, higher taxes, and lower income from other sources. The combined drag from those three factors reduced disposable income by 5 percentage points since December 2019.
At the same time, real household wealth increased by 25 per cent. Property values rose. Super balances grew. People who owned assets felt richer, even as their day-to-day cash flow tightened. That split creates strange behaviour. Someone might cut back on restaurant meals while spending more on a new car, because the car purchase feels funded by equity even though the weekly budget is stretched.
Take a typical dual-income household in Sydney. Their mortgage payments have gone up substantially since 2022. Their tax bill is higher because bracket creep pushed them into a higher rate. But their home is worth maybe 30 per cent more than it was in 2020. They feel both poorer and richer at the same time. That’s not a contradiction — it’s the new normal. The ABS Monthly Household Spending Indicator shows that total spending still rose 5.5 per cent in the year to May 2026, but the composition tells a different story from the headline.
What I notice is that businesses that cater to the asset-owning side of this divide have done better than those serving the income-constrained side. A home renovation supplier is in a stronger position than a casual dining chain targeting first-home buyers. The wealth effect is real, but it’s not universal. For a deeper look at how companies are navigating these cross-currents, this article on capital investment strategies covers the business side of the same story.
Where Spending Patterns Caught People Off Guard
Underestimating How Much Food Habits Would Stick
Food’s share of total expenditure increased by almost 20 per cent since the pre-COVID period, according to analysis by the Sydney Morning Herald. That pushed food’s weight in the consumer price index back to where it was in 2000. Dairy goods alone climbed from 0.96 per cent of household expenditure in 2019 to 1.1 per cent. Milk’s share rose by more than a quarter, with prices up 34 per cent. Bread’s share returned to 2005 levels. Tea and coffee jumped almost a quarter as more people worked from home and brewed their own.
The mistake many businesses made was assuming this was a temporary lockdown effect. It wasn’t. People discovered they could cook better at home, and many kept doing it even after restaurants reopened. The shift in where food is consumed — from out to in — has held.
Assuming Public Transport Would Recover Quickly
Public transport’s share of the inflation basket plummeted by almost 53 per cent. That’s not a small dip. It’s a collapse. Meanwhile, motor vehicles’ share increased by 27 per cent. The assumption that commuters would flood back to trains and buses after lockdowns ended has been wrong for years now. Hybrid and remote work arrangements mean fewer people need a daily commute, and those who do often prefer the flexibility of a car.
This has ripple effects beyond transport. Less public transport use means less spending on related services — dry cleaning near stations, coffee carts in transit hubs, parking garages. The whole ecosystem around the daily commute shrank.
Missing the Pet Economy Boom
Pets alone now account for more household spending than beef and sausages combined. Pet spending climbed 23 per cent since COVID. Veterinary bills rose by more than a third. The pandemic pet adoption surge created a permanent new category of committed spending. People who got a dog in 2020 are still buying food, insurance, and vet care for that animal five years later.
What caught retailers off guard was the premiumisation of pet spending. It’s not just that more households have pets — they’re spending more per pet on higher-quality food, grooming, and healthcare. If you’re in the pet space, the question isn’t whether demand will hold. It’s whether you’re positioned for the premium end of the market.
Overlooking the Hair and Beauty Recovery Lag
Hairdressing’s share of inflation rose by almost 30 per cent, but that recovery was slow and uneven. Many salons expected a quick bounce-back after lockdowns and instead faced months of cautious spending. The pattern suggests that personal services tied to appearance recovered more slowly than services tied to convenience or necessity. Tobacco consumption fell despite price increases of about 10 per cent over the past year, which runs counter to the usual pattern of inelastic demand for cigarettes.
For a broader view of how Australian businesses are handling these kinds of structural shifts, this piece on reimagining the workplace covers the generational angle that overlaps with many of these spending changes.
What the New Spending Patterns Mean for Your Business or Budget
The data from the ABS Monthly Household Spending Indicator through May 2026 gives a clear picture of which categories are growing and which are shrinking. The year-on-year figures from May 2025 to May 2026 show broad-based growth, but the composition matters more than the total.
→ Scroll right to see all columns
| Category | Monthly Change (May 2026) | Year-on-Year Change |
|---|---|---|
| Food | +1.8% | +4.5% |
| Transport | +5.5% | +5.1% |
| Recreation & Culture | +1.3% | +4.8% |
| Hotels, Cafes & Restaurants | -0.8% | +4.6% |
| Clothing & Footwear | -2.2% | N/A |
| Miscellaneous Goods & Services | +1.6% | +5.5% |
Transport’s 5.5 per cent monthly jump in May 2026 stands out, but it’s volatile month to month. The steadier story is in food and miscellaneous services, which show consistent upward drift. Clothing and footwear dropped 2.2 per cent in that month, continuing a pattern of weakness in apparel that started during the pandemic and never fully reversed.
Rethinking Your Category Position
If you run a business, the first question is whether your category gained or lost weight in the inflation basket. Categories that gained — food at home, pet products, motor vehicles, home recreation — have structural tailwinds. Categories that lost — public transport, formal clothing, some personal services — face a harder road. The mistake is assuming these weights will revert to 2019 levels. The evidence suggests they won’t.
For a business in a shrinking category, the options are limited but real. You can pivot to a related growing category, adjust your pricing model, or consolidate your position and wait for the cycle to turn. What doesn’t work is pretending the old spending patterns will return on their own.
Adjusting Your Personal Budget
For households, the key insight is that the cost of essentials has risen faster than incomes. Food, transport, and housing take up a larger share of spending than they did five years ago. That leaves less room for discretionary purchases. If your income hasn’t kept pace, the squeeze is real and likely to continue.
One practical step is to track where your own spending has shifted. If you’re spending more on takeaway coffee and less on restaurant meals, that’s a choice that makes sense given the data. If you’re spending more on car maintenance and less on public transport, that’s also consistent with the national pattern. The point isn’t to judge the choices — it’s to be aware that the environment has changed, and your budget should reflect that.
Watching the Emerging Trends
The next phase of this story is about what happens when the wealth effect fades. Property prices can’t rise 25 per cent every few years forever. If housing values stabilise or fall, the wealth effect that has supported spending on big-ticket items could reverse. At the same time, interest rate cuts would ease the income squeeze, potentially boosting discretionary spending. The interaction between these two forces — wealth and income — will determine whether the current spending patterns hold or shift again.
Businesses that are positioned for either scenario — one where rates fall and spending broadens, or one where wealth stagnates and spending tightens further — will be better off than those betting on a single outcome. If you’re looking for tools to model these scenarios, a business planning platform like MagicFit can help you stress-test your assumptions against different economic conditions.
Frequently Asked Questions
Has Australian consumer spending fully recovered to pre-pandemic levels? ▾
Why did food spending increase so much when incomes didn’t?
Are Australians spending more or less on eating out now?
How much has pet spending really changed since COVID?
Will public transport spending ever recover to pre-COVID levels?
What does the wealth effect mean for consumer spending?
The Spending Map Has Been Redrawn — Act Accordingly
The pandemic didn’t just temporarily change what Australians buy. It permanently rewired the relationship between income, wealth, and spending. Food at home, pet products, and private transport gained structural ground. Public transport, formal services, and some discretionary categories lost it. The income squeeze from higher interest rates and taxes continues to constrain cash flow, while the wealth effect from rising asset values props up spending on big-ticket items. That tension isn’t going away soon. The smartest move for both businesses and households is to accept the new weights in the basket and plan around them, rather than waiting for the old ones to return.
Remember: this article is general information only. For advice on your specific financial situation, speak to a qualified financial adviser or accountant.
If this was useful, you might also want to read Future-Proof Your Finances: Essential Skills for the Modern Aussie Investor.
Sources and Further Reading
Understanding Supply Chain Disruptions in Australia — Explores how supply chain shifts connect to the spending changes covered in this article.
Why Sales Compensation Models Are Failing Aussie Companies — Looks at how changing consumer behaviour affects sales strategy and workforce planning.
Reserve Bank of Australia (2024). Box B: Consumption and Income Since the Pandemic. 🔗
Australian Bureau of Statistics (2026). Monthly Household Spending Indicator. 🔗
Sydney Morning Herald (2024). How the Pandemic Changed What Australians Spend Their Money On. 🔗
