Australian consumer sentiment deteriorated in June, with the Westpac-Melbourne Institute Consumer Sentiment Index falling -2.9% month-on-month from 83.0 to 80.6. The decline reversed much of May’s recovery and left confidence back among the weakest levels recorded in the survey’s fifty-year history, highlighting the growing strain on households from higher living costs and rising interest rates.
Westpac said cost-of-living pressures had returned “with a vengeance”, with consumers reporting a significant deterioration in both current and expected family finances. The “family finances versus a year ago” index dropped -7.5% to 67.3, while expectations for family finances over the next 12 months fell -8.5% to 85.1. Although views on the economy over the coming year improved modestly from extremely weak levels, longer-term confidence continued to deteriorate, with the five-year outlook index falling to a three-year low of 86.5.
The survey reinforces the difficult balancing act facing RBA ahead of next week’s policy meeting. While the weakening in consumer sentiment highlights the impact of aggressive monetary tightening and higher energy prices, inflation remains the central bank’s primary concern. Westpac expects RBA to pause after raising rates at its previous three meetings, giving policymakers time to assess the effects of tightening and the energy shock. However, with underlying inflation still running above the Bank’s 2-3% target range, the prospect of further rate increases later this year remains firmly on the table.
| Indicator | May | June | Change m/m |
|---|---|---|---|
| Consumer Sentiment Index | 83.0 | 80.6 | -2.9% |
| Family Finances vs Year Ago | 72.8 | 67.3 | -7.5% |
| Family Finances Next 12 Months | 93.0 | 85.1 | -8.5% |
| Economy Next 12 Months | 74.2 | 77.8 | +4.9% |
| Economy Next 5 Years | 89.4 | 86.5 | -3.2% |
