Australian consumer sentiment jumps in October as rate concerns ease

AUSTRALIAN consumer sentiment jumped to a two-and-a-half-year high in October as consumer expectations for interest rates fell sharply and cost-of-living pressures continued to moderate, a survey showed on Tuesday (Oct 8).

The Westpac-Melbourne Institute index of consumer sentiment rose 6.2 per cent in October from September though the index reading of 89.8 showed pessimists still far outnumbered optimists.

“While pessimism still dominates, the October consumer sentiment read is the best since the RBA (Reserve Bank of Australia) interest rate tightening phase began two and a half years ago,” Westpac senior economist Matthew Hassan said.

“Expectations have been buoyed by interest rate cuts abroad and more promising signs that inflation is moderating locally. Consumers are no longer fearful that the RBA could take interest rates higher.”

The RBA left its interest rates unchanged at 4.35 per cent last month and softened its hawkish stance slightly by saying a rate hike was not discussed. Interest rates have been on hold since November last year.

Headline inflation slowed to 2.7 per cent in August, back in the central bank’s target band of 2 to 3 per cent, in part due to the government’s electricity rebates. But the RBA has said the monthly measure is volatile and it would look through the temporary impact.

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The survey’s measure of family finances compared to a year ago rose 2.8 per cent in October, while finances for the next 12 months also ticked up by the same figure.

The index measuring the economic outlook for the next 12 months jumped 14.3 per cent, while the outlook for the next five years rose 8 per cent as easing rate rise fears lifted expectations.

The “time to buy a major household item” rose 3 per cent in October, though that was well below its long-run average of 124.2.