Australian consumer sentiment weakened further at the start of the year, highlighting growing anxiety over the interest-rate outlook. The Westpac Consumer Sentiment Index fell -1.7% mom to 92.9 in January, pushing sentiment deeper into pessimistic territory.
Westpac pointed to a sharp shift in rate expectations as the main drag. Nearly two-thirds of consumers who expressed a view now expect mortgage rates to rise over the next 12 months, more than double the share seen back in September.
For policy, Westpac expects the RBA to stay on hold when it meets on February 2–3, and through the remainder of 2026. While the RBA has flagged readiness to tighten if inflation proves stubborn, softer labor market conditions and limited price pressures across many goods and services should allow inflation to drift back into the 2–3% target range without the need to “tighten precipitously.”
