It’s the biggest online shopping month of the year and despite rapidly rising living costs, retailers are gearing up for record-breaking spending this November. But the pre-Christmas blowout will lead to a painful financial hangover for some, experts warn, with a costly reality catching up with them in the New Year.

More than 21 million parcels were delivered by Australia Post during last year’s Black Friday and Cyber Monday sales, making November 2021 the biggest month in Australian online shopping history. This year is expected to be even larger as inflationary pressures drive consumers to look for bargains in the lead up to Christmas.

Households know things are getting more expensive, and they’re clearly worried. But so far, it hasn’t stopped them from spending.  All signs pointing to a post-Christmas crunch! The disconnect between how consumers are feeling and how they’re acting has been laid bare in Westpac’s latest survey of consumer confidence. It found consumer sentiment reached historic lows in November, sitting only marginally higher than when the Covid pandemic first hit. “Prior to that, we need to go back to the deep recession in the early 1990s to find a weaker read,” Westpac chief economist Bill Evans said.

Mr Evans said factors like high inflation, rising interest rates, and the outlook for house prices is weighing on confidence. Nearly 40% of consumers expect to spend less on gifts this year – the highest proportion ever. However, these concerns are yet to be reflected in shopping habits. ANZ card spending data released Tuesday showed strong momentum early this month.

“The early November upward trend in shopping (non-food retailers) is stronger than 2019 and encouraging ahead of the holiday trading period,” ANZ senior economist Adelaide Timbrell said. But that’s likely to change in 2023, Mr Evans said, as the full effect of higher interest rates start to bite. “To date, consumer spending has been quite resilient to these recessionary confidence levels due to record low unemployment and the pandemic-related accumulation of household savings,” he said. “However, we expect spending to slow markedly in 2023, something that is necessary to ensure inflation comes back to the Reserve Bank’s 2-3% target.”

Current RBA forecasts see inflation peaking at 8% by the end of the year and remaining at 6.25% by mid-2023. The RBA has already raised the cash rate from 0.1% to 2.85% since May in an attempt to get inflation lower, and it has indicated more hikes are on the way. So far, that’s added about $1,200 a month to mortgage repayments for a borrower with $750,000 outstanding on their home loan. But borrowers are yet to see the full impact on their cashflow, Mortgage Choice broker Paul Williams explained, due to the lag between each rate hike and its hit on repayments. “I would expect that in early 2023, post-Christmas, people will be going from curious to somewhat concerned,” Mr Williams said, noting many recent borrowers would not have been assessed for repayments this high.

For the past year, the Australian Prudential Regulation Authority has required lenders to apply a 300 basis point serviceability buffer to home loan applications, to ensure borrowers would still be able to meet their repayments if interest rates rose by 3%. Previously, the buffer was 250 basis points. With the RBA widely expected to raise the cash rate by 25 basis points to 3.1% in December, that buffer will have been fully absorbed. “The 2.5% to 3% buffer exists for a very good reason,” Mr Williams said. “I’d expect to see another couple of rate rises or so, which will mean that people will be over the buffer that was previously put in place.”

Westpac and ANZ expect the cash rate will reach a peak of 3.85% by May next year. NAB is tipping 3.6%, while CBA expects just one more rate hike to reach a peak of 3.1% next month.

“The lag between interest rate rises and higher mortgage repayments mean there is still substantial tightening in the system that has yet to fully hit households’ cash flow as well as the large fixed rate roll off in 2023” CBA senior economist Belinda Allen said.

This article was authored by Sarah Dowling –’s Banking and Finance journalist