Australian consumer confidence has rebounded strongly, reaching its highest level in three and a half years, as a series of rate cuts from the Reserve Bank of Australia (RBA) lifted household sentiment.
The Westpac–Melbourne Institute Consumer Sentiment Index rose 5.7% to 98.5 in August from 93.1 in June. The improvement followed the RBA’s decision to lower the cash rate by 25 basis points (bps) to 3.6%, its third cut this year, with Governor Michele Bullock signalling rates may need to move lower to support growth.
The survey showed broad-based gains across all components of sentiment, not limited to mortgage holders.
Renters reported some of the strongest improvements, helped by easing cost-of-living pressures and slower rent growth. Mortgage-belt households, however, have seen the sharpest recovery in sentiment since mid-2024.
Household finances are showing signs of recovery. The ‘family finances compared to a year ago’ index rose 6.2% to 84.2, while expectations for the next 12 months climbed 5.4% to 106.8, just above the long-term average.
Consumers are also more optimistic about the wider economy: the ‘economic outlook over the next year’ index surged 7.6% to 101.2, while the five-year outlook rose 5.4% to 98.4, both above historical norms.
Confidence around major household purchases has also improved, with the ‘time to buy a major item’ index up 4.2% to 101.7.
While still below its long-run average, the recovery reflects moderating inflation and steady wage gains.
Housing-related sentiment was a standout. The ‘time to buy a dwelling’ index jumped 10.5% to 97.8, its highest since 2021, while the House Price Expectations Index climbed 0.9% to 164.2 — the second-highest result since 2013.
Three-quarters of consumers expect home prices to rise over the next year, with the strongest expectations in New South Wales, Queensland, and Western Australia.
The survey also pointed to resilience in the labour market. The Unemployment Expectations Index fell 2.4% to 125.6, consistent with relatively stable job conditions.
Looking ahead, Westpac economists expect the RBA to keep rates steady at its September 29–30 meeting before delivering another 25bp cut in November.
