The Westpac-Melbourne Institute monthly Consumer Sentiment Index survey recorded a measure of 81, down from 82.1 in December.

It’s the Index’s most pessimistic start to a new year since the deep recession of the early 1990s.

The survey found consumer gloom is persisting despite an easing in expectation of further interest rate rises.

Consumers more confident of home loan rates halt

The latest Westpac data recorded an 8% monthly drop in consumers expecting the standard variable mortgage rate to increase over the next 12 months.

The January figure of 52% is well down on December when 60% of consumers were expecting mortgage hikes in 2024.

January’s figure is the lowest since the Reserve Bank of Australia (RBA) started lifting the cash rate in April last year.

With no RBA meeting in January, Westpac economists say the shift likely reflects the lower-than-expected November monthly Consumer Price Index indicator which signalled slowing inflation.

Consumers more pessimistic than the market

Despite easing rate rise fears, consumers are less confident in the interest rate outlook in Australia than financial markets and economists.

While more than half expect interest rates to rise, markets are now pricing in 50 basis points' worth of cuts to the cash rate by year-end with three out of four big four bank economists expecting it to drop even lower. 

The new year also saw sentiment about family finances fall markedly, dropping 7.6% in January, dashing the 11% gains recorded in the three months to December.

Sentiment surrounding the expected economic outlook over the next five years also took a hit, falling 6.1%. The biggest drops were recorded among young people and those in rental accommodation.

Conversely, there were slight improvements in shorter-term outlooks. Sentiment for the ‘economic outlook over the next 12 months’ increased 3.9% while ‘finances, next 12 months’ improved 2.9%.

The ‘time to buy a major household item’ sub-index showed no such lift, dipping slightly at very weak levels. It’s now down more than 10% in a year.

This echoes the latest CommBank monthly Household Spending Insights (HSI) Index, released yesterday, which showed a 3.9% drop in spending in December.

The biggest fall was seen in household goods, including furniture and appliances, plunging 16%.

Hope on the horizon

Today’s ANZ Roy-Morgan’s weekly Australian Consumer Confidence survey provides a glimmer of optimism.

While it found consumer confidence fell by 0.4 points last week, the four-week moving average was still up by 2 points.

It showed confidence rose in South Australia and Western Australia, but fell in New South Wales, Victoria and Queensland.

Like the Westpac survey, it showed shorter-term measures of ‘current financial conditions’ and ‘current economic conditions’ rose slightly while longer-term confidence surrounding ‘future economic conditions’ dropped.


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