Australian consumer sentiment deteriorated sharply in September, with the Westpac–Melbourne Institute Consumer Sentiment Index falling from 88.9 to 84.4, a -5.2% monthly decline that pushed confidence back toward the deeply pessimistic levels seen earlier this year. The weakness was broad-based. Assessments of family finances versus a year ago fell from 80.0 to 72.6, while expectations for family finances over the next 12 months dropped from 98.2 to 94.5. Westpac linked the setback mainly to renewed cost-of-living pressure from higher fuel prices and growing concern that stronger inflation could trigger another RBA rate hike.
Rate fears were especially visible among mortgage holders. The Mortgage Rate Expectations Index rose from 158.8 to 170.4, with the share of consumers expecting mortgage rates to rise over the next year increasing from 59% to 64%. Among mortgage holders, that share was closer to 73%. Housing sentiment weakened at the same time, with the “time to buy a dwelling” index falling from 95.7 to 85.5, while unemployment expectations rose from 135.7 to 139.4, indicating greater unease over the labour-market outlook.
Westpac nevertheless expects the RBA to hold rates at the September 28–29 meeting. It acknowledged that July’s stronger CPI has increased the likelihood of a future hike, but argued that the Board is unlikely to respond to a single monthly inflation reading from what remains a noisy series, particularly with the next CPI update due a day after the meeting. The message is therefore not that tightening risk has disappeared, but that weakening consumer demand reduces the urgency for an immediate move even as inflation keeps another hike on the table.
Data Summary
| Indicator | September | August | Change |
|---|---|---|---|
| Consumer Sentiment Index | 84.4 | 88.9 | -5.2% |
| Family finances vs a year ago | 72.6 | 80.0 | -9.2% |
| Family finances, next 12 months | 94.5 | 98.2 | -3.8% |
| Economic conditions, next 12 months | 79.5 | 82.8 | -4.0% |
| Economic conditions, next 5 years | 85.8 | 89.8 | -4.5% |
| Time to buy a major household item | 89.3 | 93.8 | -4.8% |
| Time to buy a dwelling | 85.5 | 95.7 | -10.7% |
| Unemployment Expectations Index | 139.4 | 135.7 | +2.8% |
| House Price Expectations Index | 110.3 | 110.8 | -0.4% |
| Mortgage Rate Expectations Index | 170.4 | 158.8 | +7.3% |
Higher readings in the Unemployment Expectations Index indicate more consumers expect unemployment to rise.
Key Takeaways
- Australian consumer sentiment fell from 88.9 to 84.4, a 5.2% decline that pushed confidence back toward the deeply pessimistic levels seen earlier this year.
- Household finances were the main pressure point, with assessments of finances versus a year ago dropping from 80.0 to 72.6 as higher fuel prices and rate-hike fears weighed on consumers.
- Mortgage-rate expectations rose sharply from 158.8 to 170.4. Some 64% of consumers expect mortgage rates to increase over the coming year, rising to about 73% among mortgage holders.
- Housing and labour-market sentiment also deteriorated. “Time to buy a dwelling” fell from 95.7 to 85.5, while unemployment expectations increased from 135.7 to 139.4.
- Westpac says July’s stronger CPI has raised the probability of a future RBA hike, but still expects the Board to hold at the September 28–29 meeting rather than react to one monthly inflation print.
