Australia Consumer Mood Stays Cautiously Pessimistic

Australia’s Westpac-Melbourne Institute Consumer Sentiment Index surged 5.7% mom in August 2025 to 98.5, the highest since February 2022, after a 0.6% rise in July. Sentiment was buoyed by the Reserve Bank’s 75bps rate cuts since January and a more optimistic policy tone. All components rose: family finances compared to a year ago rose 6.2% to 84.2, despite being below long-run average of 88, while expectations for the next 12 months climbed 5.4% to 106.8. Views on the economy improved, with the 12-month outlook up 7.6% to 101.2 and the 5-year outlook rising 5.4% to 98.4, both above historical norms. The time to buy a major household item index gained 4.2% to 101.7, while unemployment expectations fell 2.4% to 125.6, still below the long-run level of 129. Mathew Hassan, Head of Australian Macro-Forecasting, said the long spell of consumer pessimism may be ending, though sustaining momentum could require more easing. But he noted policymakers face no urgent pressure for further cuts.

Australia's Westpac-Melbourne Institute Consumer Sentiment Index rose 4% in March, reaching 95.9 from 92.2 in February—its highest level in three years. The increase was driven by the Reserve Bank of Australia's interest rate cut in February and easing cost-of-living pressures. The index is now just 4% below the neutral level of 100, where optimists and pessimists are evenly balanced. Survey results showed broad-based improvement, with a notable rise in confidence regarding the labor market outlook. Among key topics, ‘inflation’ remained the most recalled issue, followed by ‘budget and taxation,’ ‘employment,’ ‘economic conditions,’ and ‘interest rates.’ Despite the overall improvement, some concerns persist, particularly regarding international developments. While not the most pressing issue, the ongoing US tariff disputes and strained relations with its allies continue to cause unease.

Australia's Westpac-Melbourne Institute Consumer Sentiment Index saw a slight increase of 0.1% in February 2025, rising to 92.2 from 92.1 in January, signaling little change in consumer mood. Despite this modest rise, consumers remain cautious due to stretched household finances and ongoing cost-of-living challenges. However, there are signs of rising optimism about the future. The sub-index measuring ‘family finances compared to a year ago’ dropped 3.4% in February, falling to 75.1—down 10.6% from its December peak, but still up 18.9% compared to the low point in May of last year. Meanwhile, the sub-index for ‘finances in the next 12 months’ increased by 0.6%, reaching 105 and remaining in positive territory. This suggests that optimists continue to outnumber pessimists. Notably, the most significant improvement since last year has been observed among consumers with a mortgage, driven by better-than-expected inflation data and growing expectations of interest rate cuts.