AUSTRALIA’S consumer confidence rebounded from a 2-1/2-year low as households assessed the Reserve Bank’s (RBA) rapid tightening cycle is approaching an end, boosting expectations for family finances and the economy’s outlook.

Consumer sentiment climbed 3 per cent to 80.3 in December, still some 23 per cent below its level a year ago, Westpac Banking said in a statement on Tuesday (Dec 13). The reading highlights that pessimists greatly outnumber optimists, with a dividing line of 100.

The result follows a “disastrous 6.9 per cent drop in November”, Westpac chief Economist Bill Evans said. “In the case of interest rates, there are even some signs that the news is becoming viewed as slightly less negative — consistent with the notion that the bulk of the interest rate tightening cycle is now behind us.”

The RBA has raised rates by 3 percentage points since May, its sharpest tightening cycle in 33 years, as policymakers sought to rein in spiralling inflation. The hikes have hammered consumer confidence and damped the property market as households guarded for rising mortgage repayment.

Most economists predict the RBA will hike another one or two times from the current 3.1 per cent cash rate, with the peak seen at 3.6 per cent.

Hopes that the RBA is nearing a pause in tightening “most likely contributed to a surprising lift in the outlook for house prices”, Evans said. The “family finances, next 12 months” sub-index lifted 6.9 per cent.

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Confidence in the economy also improved. The “economic outlook, next 5 years” sub-index rose 5.2 per cent, Evans said.

Sentiment also improved in tourism-driven Queensland, as well as among employees in “recreational services” and education, indicating a return of tourists and international students is bolstering those industries.

Westpac’s survey was conducted during the week when the RBA raised rates by 25 basis points, its eighth straight monthly hike, and separate data showed the economy grew by a stellar 5.9 per cent in the third quarter from a year earlier. BLOOMBERG