Australia’s consumer sentiment soars 12.8% on economic outlook

AUSTRALIA’S consumer confidence soared in November as households turned more positive on the economy, a result that’s likely to further reduce the chances of a near-term interest-rate cut.

Sentiment surged 12.8 per cent to 103.8 points, a Westpac Banking survey showed on Tuesday. This is the first time optimists have outweighing pessimists since February 2022, with 100 the dividing line, snapping 44 months of pessimism among Australian consumers.

“This is an extraordinary and somewhat surprising result. November marks the first ‘net positive’ read on consumer sentiment in the best part of four years,” said Matthew Hassan, Westpac’s head of Australian macro forecasting. 

“Domestically, there are clearer signs that a recovery is gaining momentum, especially around consumer demand and housing markets,” he said. “The real surprise, though, is how much these positives have outweighed renewed concerns about inflation and the outlook for interest rates.”

The Reserve Bank kept borrowing costs unchanged last week at 3.6 per cent, highlighting concerns about lingering inflation pressures and a still tight job market. Governor Michele Bullock signalled that further policy easing is unlikely in the near-term after three rate cuts this year.

The improvement sentiment was driven by a strong rise in households’ assessment of their position. The family finances, next 12 months’ sub-index surged 12.3 per cent to 109.1. Notably, Westpac said, this gain came despite a 0.3 per cent dip in expectations among households with a mortgage.

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Despite improved confidence around the outlook for the economy and family finances, consumers are more anxious about jobs.

The Westpac–Melbourne Institute Unemployment Expectations Index rose 9.3 per cent to 139.5 in November. A higher index reading means more consumers expect unemployment to increase over the year ahead.

Other key data points

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In a promising result for retailers, there was a big lift in buyer sentiment. The time to buy a major item sub-index surged 14.9 per cent to 111.6 in November, a four-year high

Yet current assessments of finances showed a more muted gain. The family finances vs a year ago sub-index rose 3.7 per cent to 85.2, leaving it in net pessimistic territory and below long-run averages

Homebuyer sentiment was largely unchanged in November, with the time to buy a dwelling index ticking down 0.1 per cent to 96.4

Consumers remain very bullish on the outlook for house prices. The Westpac– Melbourne Institute Index of House Price Expectations edged up 0.3 per cent in November to 172.4, marking a new cycle high. BLOOMBERG