Australian consumer sentiment improved in July, with the Westpac–Melbourne Institute Consumer Sentiment Index rising 4.1% to 83.9. The increase suggests households have become less concerned that the Reserve Bank of Australia’s June decision to leave the cash rate unchanged would be followed by another rapid sequence of rate hikes. Even so, confidence remains deeply depressed. At 83.9, the index still ranks among the weakest 10% of readings recorded over the survey’s 50-year history.
The survey points to easing fears rather than renewed optimism. Expectations for the economy over the next 12 months and five years improved only marginally and remain well below long-run averages. Consumers were, however, more positive about the labor market, with the Unemployment Expectations Index falling -7.1% to 129.9, returning close to its historical norm. Uncertainty over the interest-rate outlook also remains elevated, with 17% of respondents saying they “don’t know” where rates are headed—the highest proportion since March 2022—highlighting the lack of conviction surrounding the RBA’s next move.
For policymakers, attention now shifts firmly to the June quarter CPI report due on July 29. Westpac argues the improvement in confidence partly reflects relief that worst-case scenarios for energy prices, interest rates and employment have not materialized. However, it also expects inflation to remain uncomfortably high, supporting another 25 basis point rate increase at the RBA’s August meeting. Recent communication from senior RBA officials has emphasized that inflation persistence remains the Board’s primary concern, suggesting stronger sentiment alone is unlikely to alter the central bank’s readiness to tighten policy again if price pressures fail to ease.
Economic Data
| Indicator | Actual | Previous |
|---|---|---|
| Westpac–Melbourne Institute Consumer Sentiment Index | 83.9 | 80.6 |
| Consumer Sentiment (MoM) | +4.1% | — |
| Economy, Next 12 Months | 78.3 | 77.7 |
| Economy, Next 5 Years | 87.1 | 86.4 |
| Unemployment Expectations Index* | 129.9 | 139.9 |
| Consumers Unsure About Interest Rate Outlook | 17% | — |
Market Takeaways
- Consumer sentiment improved after the RBA paused in June, easing fears of a rapid succession of further rate hikes.
- Despite the rebound, confidence remains historically weak, with the index still in the lowest 10% of readings over the survey’s 50-year history.
- Consumers became more optimistic about the labour market, while views on the broader economy improved only marginally.
- Uncertainty over the interest-rate outlook remains unusually high, with 17% of respondents unsure where rates are headed.
- The June quarter CPI report on July 29 is expected to be the decisive input for the RBA’s August policy meeting.
- Improving confidence alone is unlikely to alter the RBA’s inflation-focused stance if price pressures remain elevated.
