This paper examines the nature of income uncertainty facing Australian households, and how unanticipated income changes affect consumption. Using panel data from the Household, Income and Labour Dynamics in Australia survey, I begin by documenting the life-cycle pattern of income and consumption among Australian households, finding that the variance of (log) income and food spending tends to rise linearly with age. Consistent with this evidence, I fit a permanent-transitory model to income growth, finding that transitory shocks account for the bulk of year-to-year fluctuations in income and have a variance two to three times that of permanent shocks. I utilise data on food spending to examine the extent to which households adjust their consumption to these different kinds of income shocks. My estimates show that about 60 per cent of a permanent income shock passes through into consumption, whereas the pass-through of transitory shocks into consumption is essentially zero. I also find evidence of a larger pass-through of permanent shocks into consumption among households with lower financial wealth, implying they are less able to smooth their consumption in the face of income shocks.