The Westpac Consumer Sentiment Index rose by 2.8% in August, reaching 85, up from 82.7 in July. Despite this uptick, overall consumer confidence remains subdued, with the index still hovering within the 78-86 range that has persisted for over two years.
The latest data reveals a modest rebound in views on family finances, driven by clearer signs of support from tax cuts and fiscal measures. The ‘family finances vs a year ago’ sub-index saw a significant increase of 11.7%, marking its strongest monthly gain in nine years (excluding the COVID-19 period). This rise was especially pronounced among low-income earners, younger Australians aged 18-34, those over 65, and residents of South Australia, Queensland, and Victoria. However, at 70.9, the sub-index remains weak by historical standards.
Consumer expectations for the year ahead also showed improvement, with the ‘family finances, next 12 months’ sub-index climbing 5.1% to 96.8, the highest level since interest rate hikes began in May 2022.
Concerns over future interest rate hikes have eased notably. The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which measures consumer expectations for variable mortgage rates over the next year, dropped by 14.9% in August, reversing much of the previous three months’ gains. This decline suggests that consumers’ fears over rate rises had already started to subside, even before the RBA’s decision to keep rates unchanged in August.
Despite these improvements, consumer sentiment around housing remains bleak. The ‘time to buy a dwelling’ index fell by 5.8% to a new low of 71.4 for the year, while the House Price Expectations Index dipped by 2.1% to 157.8, returning to levels last seen in late 2022.
On the jobs front, Australians continue to feel relatively secure, with only a slight deterioration in unemployment expectations. The Unemployment Expectations Index rose by 3.8% to 133.5, indicating that while some expect a rise in unemployment, sentiment around job security is still better than long-term averages. CreditorWatch’s Chief Economist, Anneke Thompson said: “ While consumer sentiment lifted slightly according to Westpac’s August survey, it is still in deeply negative territory. This survey is reflective of the extremely difficult trading conditions facing many retailers in the discretionary spend sector. In more positive news, consumers felt confident about the job market, with the unemployment expectations index sitting just above the long-term average, and in positive territory. Consumers also appear to be less concerned about further interest rates rises, following the release of the June quarter CPI data.
“CreditorWatch’s Business Risk Index (BRI) data for July indicates that areas in Australia that have highly mortgaged households and a lower average median age will also have businesses that are in the higher risk category for business failure. Business failure rates across 87.2 per cent of regions in Australia are expected to increase over the next 12 months, highlighting the scale of the difficulty facing the economy, particularly those operating in the retail sector.”
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