Australian consumer sentiment has fallen to its weakest level in six months, with rising concerns about inflation and the economic outlook dragging confidence lower, according to Westpac’s latest monthly survey.
The Westpac–Melbourne Institute Consumer Sentiment Index declined 3.5% to 92.1 in October from 95.4 in September, marking a return to firmly pessimistic territory.
Matthew Hassan, Westpac’s Head of Australian Macro-Forecasting, said: “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.”
The report found that sentiment deteriorated across most categories, reversing gains made earlier this year when expectations of interest rate cuts briefly lifted household morale.
Westpac said the renewed slump came as consumers became increasingly uneasy about the persistence of inflation, which has shown signs of firming again.
“Consumers appear to have been rattled 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,” the bank said.
The biggest declines were recorded in assessments of family finances. The ‘family finances, next 12 months’ sub-index fell nearly 10% to 97.1, marking its weakest reading in more than a year and only the second time it has dipped below 100 since November.
The ‘family finances vs a year ago’ sub-index dropped 4.8% to 82.1, unwinding over half of the gains from the past two months.
Consumers also grew more pessimistic about near-term economic prospects. The ‘economic outlook, next 12 months’ sub-index fell 2.5% to 89.9 - the lowest level in a year - while longer-term expectations were more resilient, with the ‘economic outlook, next 5 years’ sub-index rising slightly by 1.4% to 94, just above the long-run average of 92.
Spending sentiment also softened, with the ‘time to buy a major item’ sub-index dipping 1.1% to 97.2 in October.
Despite a strong rebound since mid-2024, this component remains well below its long-term average of 124, indicating that consumers are likely to stay cautious heading into the peak retail season.
The Westpac–Melbourne Institute Mortgage Rate Expectations Index surged 15.6% to 101.7, reflecting heightened uncertainty about the future path of interest rates.
Early survey responses suggested more hawkish expectations, but those surveyed after the Reserve Bank of Australia’s October decision were more confident that rates would stay the same or move lower within a year.
While sentiment has softened, the survey suggested that consumers are not overly worried about job security.
The Westpac–Melbourne Institute Unemployment Expectations Index fell 2.9% to 127.6 in October - slightly below its long-run average but consistent with a stable labour market.
Homebuyer sentiment remained relatively steady, with the ‘time to buy a dwelling’ index up marginally by 0.4% to 96.5.
Confidence was strongest in Victoria (108) and near neutral in New South Wales (98), but weaker in Queensland (86) and Western Australia (87).
Even so, all state readings remain well below their long-term averages in the 116–124 range, suggesting housing affordability continues to weigh on demand.
