Consumer sentiment recovery resumes
- Westpac Consumer Sentiment Index drops 6% to 90.1 in April.
- Confidence falls to six-month low as tariff war and share market slide impact.
- Sentiment 10% lower amongst those surveyed post US tariff announcement.
- Consumers less confident on prospect of interest rate cuts.
“The Westpac–Melbourne Institute Consumer Sentiment Index fell 6% in April, to 90.1 from 95.9 in March.”
“Consumers are showing deepening unease about developments abroad. Sentiment weakened sharply over the course of the survey week, with steep falls following the ‘reciprocal tariffs’ announced by US President Trump on April 2. Those surveyed before the announcement reported an index read of 93.9 down only slightly from March’s 95.9. Those surveyed after the announcement reported an index read of just 86.6, down nearly 10% compared to March. The scale and breadth of tariff increases, which included a 10% tariff on Australian goods, came as a major surprise, triggering a sell-off in global financial markets. With the situation still deteriorating, there is a clear risk of more significant sentiment declines in the months ahead.”
“All component indexes deteriorated in April... Around family finances, consumers are feeling a tighter pinch now and are less positive about the outlook… The ‘family finances vs a year ago’ sub-index recorded a sharp 8.5% fall to 70.2, the weakest level since the ‘stage 3’ tax cuts came into effect in July last year. This almost certainly reflects the steep declines in global share markets – the S&P/ASX200 falling 10% between the February and April surveys and the S&P500 down closer to 16%. The subgroup detail shows bigger declines across older age-groups that would have more exposure to the market decline, particularly through superannuation holdings.”
“The ‘family finances, next 12 months’ sub-index declined 6.2% to 101.6. Here the detail suggests tariff-related concerns have been compounded by a slightly more uncertain outlook for interest rates. Expectations showed a slightly bigger retracement amongst households with a mortgage.”
“Certainly, consumers as a whole are less confident about the prospect of further interest rate cuts. The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, rose 11.3% to 98.1. Consumers are nearly evenly split on whether interest rates will fall or rise.”
“Notably, the Federal budget appears to have been a slight positive in the mix. Since 2010, our budget month surveys have asked consumers whether they expect the budget to improve or worsen their finances over the year ahead. Responses usually show a heavy negative bias – those expecting to be worse off outnumbering those expecting to benefit by nearly 20%. This year, the gap was just 10% with 15% of consumers expecting to be better off and 25% expecting to be worse off.”
“Unease about the economic outlook has also taken some of the gloss off consumer confidence around jobs. The Westpac–Melbourne Institute Unemployment Expectations Index rose 5.1% to 123.9 in April.”
“On housing, consumers have turned more pessimistic on assessments of ‘time to buy’ but are more positive on the price outlook, affordability tensions again to the fore.”
The Westpac–Melbourne Institute Consumer Sentiment Index for April 2025 was released at 11 am (AEDT), on Tuesday 8 April 2025. The index for May 2025 will be released at 11 am (AEDT), on Tuesday 13 May 2025.
The Westpac–Melbourne Institute Survey of Consumer Sentiment Index measures changes in the level of consumer confidence in economic activity. Further information can be found here.