One of the first things many Australians did last year after receiving a tax refund or a lower mortgage rate was to buy an armchair, an air fryer or a coffee machine.

The purchases, evident in company earnings published this week, came after households had endured years of high living costs – and consumption had been weak up until that point.

And policymakers didn’t think homeowners or renters had the spare capacity.

This pickup in demand – along with rising prices – for such goods turned out to be an important factor in the Reserve Bank’s decision to raise interest rates, because it was concerned inflation was broadening.

“The things that are driving the uptick in inflation really are housing, durable goods and market services,” Michele Bullock, the RBA’s governor, said last week.

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So, why are people increasingly buying consumer durables – goods that are designed to last for at least three years, like fridges, TVs and vehicles? What does that tell us about Australians’ attitudes towards debt – and how does it affect interest rates?

For much of 2024 and early 2025, goods inflation was weak amid a cost-of-living crisis before suddenly accelerating.

AMP’s head of investment strategy and chief economist, Shane Oliver, says the spending patterns show that Australians just needed a bit of financial relief to feel confident again.

“People seem to be withstanding higher levels of debt than previously thought,” Oliver says.

Breville reported double-digit revenue growth in Australia over the past six months, backed by surging coffee machine sales. While some customers bought simple drip devices and, at the other end of the price scale, touchscreen brew-to-order machines, most bought middle-class models priced at about $700.

The premium furniture retailer Nick Scali reported a 13% lift in sales revenue from its Australian and New Zealand business unit while also expanding profit margins.

Meanwhile, revenue at online retailer Temple & Webster increased 20% – although many customers waited for discounts, crimping the company’s profitability.

Such discretionary purchases were made despite very high household debt in Australia, both historically and compared with the rest of the world.

While mortgage and rental stress is traditionally defined as spending more than 30% of pre-tax income on loan repayments and rent, many Australians are now either comfortable with (or resigned to) the fact that they will breach this metric due to high housing costs.

It appears that as long as someone has a job, and Australia has robust employment levels, they are willing to spend.

‘Upgrading the car’

Ashwin Clarke, a senior economist at the Commonwealth Bank, says Australians have been willing to spend on discretionary items such as household goods as easing inflation and rate cuts brought respite after some “pretty tough” years.

“We had three interest rate cuts last year which also helped to boost household incomes,” Clarke says. “We have seen mortgagees increase their spending more than other housing cohorts over the last several months.”

CBA’s analysis of de-identified payments data from 7 million customers found household spending rose 0.5% in January, marking 16 consecutive months of growth.

Its data shows that consumers splashed out on tickets, travel and fitness, with major events including the Australian Open tennis and summer festivals drawing strong crowds.

It also noted strong purchases of clothing and hardware.

There is also evidence that mortgage-free young adults are seeking ways to navigate affordability pressures without completely giving up on indulgences, even if that means plunging deeper into debt.

This contrasts with the historical, cautious response of forgoing discretionary items altogether when facing financial pressure.

Prof Gary Mortimer, a retail expert at the Queensland University of Technology, says those aged over 55 remain the cohort most likely to buy durable goods.

“They’re updating tv sets, they’re travelling … they’re upgrading the car,” he says. “They’re the big spenders at the moment.”

When the RBA lifted the cash rate this month, ending its shortest rate cut cycle in 30 years, it cited housing and consumer durables as key drivers of a resurgence in underlying inflation.

The RBA also noted there were constraints on the economy’s ability to deliver the things people and businesses demanded, leading to higher prices.

Although consumer durables are still a modest contributor to the rise in the consumer price index, central bankers see them as a “canary in the coalmine” for the broader economy, given that they could usher in more permanent inflationary pressures that are hard to reverse.

While the central bank anticipated demand for both housing and consumer durables to slow, bringing down inflation in these sectors, it warned this outlook was “highly uncertain”.

The question now turns to whether rising inflation will sour sentiment, or if Australians will keep buying more couches and coffee machines.

While this earnings season has delivered mixed answers to that question, shares in Nick Scali plunged by more than 15% after it released its earnings on Friday.

Investors were reacting to weaker-than-expected January sales figures, which could indicate some of last year’s buying enthusiasm is already waning as cost-of-living pressures reignite.