Quick Bite – Aust Consumer Confidence Falls
Australia’s Westpac-Melbourne Institute Consumer Sentiment Index decreased to 92.1 in October from 95.4 in the previous month, falling 3.5% and marking the lowest reading in five months. Consumer Confidence in Australia averaged 100.23 points from 1974 until 2025, reaching an all-time high of 123.90 points in May of 2007 and a record low of 64.60 points in November of 1990.
Source: Trading Economics
Consumer confidence has fallen 6.5% over the last two months, giving back all the gains seen between May and August when rate cuts were giving a clear boost. At 92.1, the October Index read is now at firmly pessimistic levels, albeit still well above the very weak reads seen during the extended ‘cost-of-living’ crisis.
Consumers appear to have been unsettled by recent updates on inflation. ‘Partial’ measures released over the last month suggest annual inflation has lifted back towards the top of the RBA’s 2–3% target range. This news, and signs of firmer consumer demand and a pick-up in housing markets, looks to have sparked renewed doubts about the path of interest rates, weighing on near-term expectations for family finances and the economy.
Responses in the survey show the RBA’s decision to leave rates on hold at its September meeting went some way towards calming these fears. Sentiment was 2–3pts lower amongst those surveyed prior to the RBA decision with this sub-group clearly bracing for a more hawkish decision. Just over half expected mortgage interest rates to rise over the next 12 months, compared to about a third of respondents surveyed after the announcement.
The survey showed the latest weakening centred on more downbeat views on the near-term outlook, especially prospects for family finances.
The Consumer Sentiment Index is a composite measure based on five sub-indexes: two tracking assessments of family finances, two tracking expectations for the economy and one on whether consumers see now as a good time to buy a major household item.
Four of the five sub-indexes recorded declines in October. Assessments of family finances recorded the biggest falls. Forward views saw a particularly marked deterioration, with the ‘family finances, next 12 months’ sub-index down nearly 10% to 97.1. This is the weakest read in just over a year and only the second ‘net pessimistic’ sub-100 read since November.
Current assessments were also downgraded, suggesting support coming from policy – both this year’s interest rate cuts and last year’s tax cuts – may be starting to wane. The ‘family finances vs a year ago’ sub-index was down 4.8% to 82.1, unwinding just over half of the gain over the previous two months.
The Reserve Bank Monetary Policy Board (MPB) next meets on 3/4 November. With inflation within the target range and monetary policy still a little on the restrictive side, the next rate move can be expected to be down. However, the MPB remains cautious, especially after the stronger than expected result for the August CPI indicator, and it will be sensitive to the flow of data. A cash rate cut in November is far from assured, though neither is it off the table. And the longer the MPB delays further cuts, the more likely it is that it will end up cutting by more than it currently envisages.
