Australia consumer sentiment recovery stalls on budget squeeze
The consumer mood remains gloomy with 100 points the dividing line between pessimism and optimism
AUSTRALIA’S consumer confidence remained little changed this month as a recovery to the second half of last year showed signs of stalling, reflecting the ongoing cost of living pressures and mounting global uncertainty.
Sentiment rose 0.1 per cent in February to 92.2 points, a Westpac Banking survey showed on Tuesday (Feb 11). The consumer mood remains gloomy with 100 points the dividing line between pessimism and optimism.
“Much of that caution still centres around stretched household finances, which look to have come under renewed pressure since the start of the year,” said Matthew Hassan, a senior economist at Westpac.
“Overall, the mix suggests there may have been a larger than normal financial ‘hangover’ from the Christmas period and that many are still struggling with cost-of-living problems.”
The report comes a week before the Reserve Bank of Australia (RBA) is expected to begin its monetary policy easing cycle, having held its benchmark rate at 4.35 per cent since November 2023.
Household sentiment has been in the doldrums in the post-pandemic period as a surge in inflation prompted the RBA to tighten policy at the fastest pace in a generation. That has weighed on the private sector, with the economy barely expanding in the second and third quarters of 2024 and the property market losing steam.
The Westpac survey’s sub-indexes tracking expectations for the economy over the next 12 months and next five years both ticked higher in February. Still, they remained below the key 100 level, likely reflecting “a more unsettled global backdrop”, according to the report. The poll was conducted from Feb 3 to 6.
Other key data points:
- The family finances vs a year ago sub-index slipped 3.4 per cent in February to 75.1 points. The pull-back was most pronounced for low-income earners, females and those aged 18 to 24.
- Consumers have become much more confident about the prospect of rate cuts, Westpac said.
- The ‘time to buy a major household item’ sub-index was essentially unchanged.
- The Westpac-Melbourne Institute Unemployment Expectations Index dipped 1.1 per cent to 125.8, meaning slightly more respondents expect unemployment to fall over the year ahead.
- “The ‘time to buy a dwelling’ index declined 2.3 per cent in February to 87.8. BLOOMBERG
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