Quick Bite – Aust Consumer Sentiment on the Rise
In a somewhat surprising surge, the Westpac–Melbourne Institute Consumer Sentiment Index surged 12.8% to 103.8 in November from 92.1 in October. This is welcome news indeed, coming when the crucial year end Christmas shopping period is just around the corner.
This is a surprising and positive result. November marks the first ‘net positive’ read on consumer sentiment in almost 4 years. An Index read above 100 means optimists outnumber pessimists. This is the first time this has happened since February 2022. Excluding the COVID pandemic disruptions in 2020 and 2021, this is the most positive result in 7 years.
Source: Trading Economics
Sentiment overall is still only marginally positive rather than strongly optimistic. However, the move draws a line under what had been an extended period of consumer pessimism when disposable incomes were hit by a combination of high inflation, high interest rates and rising tax payments.
Much of the November sentiment gain is coming from a markedly more confident assessment of prospects for the economy. The ‘economic outlook, next 12 months’ and the ‘economic outlook, next 5 years’ sub-indexes both jumped sharply in the month (up 16.6% and 15.3% respectively). Both sub-indexes are now in solid positive territory, well above long-run averages.
The index reached a peak of over 115 points around mid-2021, but then endured a significant period of pessimism (below 100 points) from early 2022 to mid-2025.
The move likely reflects several developments.
Domestically, there are clearer signs that a recovery is gaining momentum, especially around consumer demand and housing markets. Meanwhile, external threats also appear to have eased with a positive meeting between President Trump and PM Albanese and recent meetings between Australia and the US resulting in a new deal on the supply of critical minerals and rare earths, de-escalation of US–China trade tensions, and better news on Chinese economic growth and commodity prices.
The real surprise, though, is how much these positives have outweighed renewed concerns about inflation and the outlook for interest rates. Since the last September quarter CPI data and recent speeches out of the RBA, the central bank has hosed down expectations of further cuts and futures markets have priced those expectations into markets. And yet consumer sentiment appears to have taken that new reality in its stride.
