Consumer confidence in Australia climbed in March, with the Westpac–Melbourne Institute Consumer Sentiment Index rising 4% to 95.9, marking a three-year high.
The surge follows the Reserve Bank of Australia's (RBA) February rate cut and an easing in cost-of-living pressures.
Westpac noted that sentiment had been recovering since mid-2023 but experienced a setback during the Christmas–New Year period. However, March saw renewed optimism, particularly in the labour market outlook.
Despite this improvement, concerns over global economic conditions persist. Westpac's quarterly news recall survey revealed that while Australians viewed domestic economic news more favourably, international developments were a growing concern.
“Inflation” remained the most recalled news topic, followed by budget and taxation, employment, economic conditions, and interest rates.
Although the majority of respondents still saw inflation-related news as negative, sentiment had improved, with 65% viewing it unfavourably in March, down from 75% in December.
Conversely, news about international conditions became more negative, with 82% of respondents rating it unfavourable, up from 68% in mid-2024. The U.S. tariff war and deteriorating relations with key allies were noted as growing concerns.
A key positive shift was seen in buyer sentiment. The ‘time to buy a major household item’ index climbed 6.9% to 97.1, suggesting that the worst of the post-pandemic consumer downturn may be easing.
Confidence in interest rates also improved. The Westpac–Melbourne Institute Mortgage Rate Expectations Index fell 2.2% to 88.2, indicating that more consumers now expect further rate cuts over the next 12 months.
While consumer sentiment strengthened, business confidence faltered in February. NAB’s business confidence index dropped 6 points to -1, reversing the gains seen in January and falling below the long-term average.
NAB’s survey showed that business conditions improved slightly to 4 index points, with both trading and profitability increasing marginally.
Employment eased but remained slightly above average. Mining conditions, which had experienced a significant decline in January, improved somewhat but continued to lag behind other sectors.
Retail confidence remained weak, with forward orders showing no significant improvement.
Regional disparities were also evident. Conditions weakened across most states except Victoria and Tasmania, which had previously reported the weakest performance in January.
Confidence fell across all states, with Western Australia seeing the steepest decline.
Capacity utilisation dipped to 81.9%, reflecting a softer demand outlook.
NAB Chief Economist Alan Oster highlighted business caution despite recent economic improvements:
“The lift in confidence seen last month was not sustained into February and is now well below average again,” said Oster. “This was despite the improvement seen in Q4 GDP data and the RBA’s first rate cut, which suggests that businesses continue to be cautious about the outlook.”
