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Australian consumer sentiment rises in July to 83.9, still near lows

The Westpac-Melbourne Institute index lifted 4.1% in July, but 17% of respondents said they do not know where rates are headed, the highest share since March 2022.

Reported · Written up by our desk · Central Banks

Australian consumer sentiment improved in July, with the Westpac-Melbourne Institute Consumer Sentiment Index rising 4.1% to 83.9, indicating households were less worried that the Reserve Bank of Australia would follow its June decision to hold the cash rate with another rapid round of hikes. Still, confidence remains deeply depressed, with the latest reading among the weakest 10% of results over the survey’s 50-year history, pointing to easing fears rather than renewed optimism.

The survey showed only marginal improvement in expectations for the economy over the next 12 months and five years, with both measures well below long run averages. In contrast, consumers were more positive about the labor market, as the Unemployment Expectations Index fell 7.1% to 129.9, moving close to its historical norm.

Uncertainty about the interest rate outlook also stayed elevated. Seventeen percent of respondents said they “don’t know” where rates are headed, the highest proportion since March 2022, underscoring a lack of conviction about the RBA’s next move.

For policymakers, attention now turns to the June quarter CPI report due on July 29. Westpac said the sentiment improvement partly reflects relief that worst case scenarios for energy prices, interest rates, and employment have not materialized, but it still expects inflation to remain uncomfortably high, supporting another 25 basis point rate increase at the RBA’s August meeting, given recent RBA guidance focused on persistent inflation.

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