Australia’s consumers are pulling back on spending as prices continue to rise, while businesses begin to struggle. 

A series of data releases by the Australian Bureau of Statistics (ABS) shed light on the economic landscape since the start of the US-Iran conflict, one which has created global strain on supply chains, and fuelled inflation, subsequently cited in the reasoning behind the Reserve Bank of Australia’s recent interest rate hikes.

The ABS says these events have impacted the supply chains of 31 per cent of retail businesses. At the same time, 71 per cent of retailers said they have been negatively impacted by rising fuel costs.

As cost pressures have intensified, so too has the price of goods. The country’s consumer price index (CPI) reflects rapidly increasing prices. Chief among these goods is clothing and footwear, which, from April 2025 to 2026, have increased by 6.1 per cent, just behind housing and transport, the fastest-increasing sectors.

Across the same period, alcohol and tobacco have risen by 4.3 per cent, food and non-alcoholic beverages by 2.8 per cent, and furniture, home equipment, and household services by 1.2 per cent.

Now, households are starting to reduce their spending. ABS data for April, around one month into the war, and Strait of Hormuz’s closure, has seen the typically rising spending figures begin to trend downward.

Discretionary spending, the kind which encompasses retail, has fallen by 0.8 per cent on a seasonally adjusted basis from March. This outperforms the decline in non-discretionary spending; transport, food, and fuel, which have fallen by 1.7 per cent month-to-month. Meanwhile, spending on services fell by 1.9 per cent.

Victoria and NSW saw the sharpest declines in spending on clothing and footwear at 3.2 per cent and 3 per cent, respectively. WA recorded the largest decrease in overall household spending, at 1.9 per cent.