Consumer sentiment sinks back to lows
- Westpac–Melbourne Institute Consumer Sentiment Index drops 5.2% to 84.4.
- Finances coming back under pressure from higher fuel and rate rise fears.
- Housing downturn starting to weigh on sentiment amongst homeowners.
- Nearly two thirds of consumers now expect mortgage rates to rise.
- Homebuyer sentiment pulls back sharply but price expectations steady.
- Consumers uneasier about jobs, especially construction and hospitality workers.
“The Westpac–Melbourne Institute Consumer Sentiment Index declined 5.2% to 84.4 in September from 88.9 in August.”
“The fall takes sentiment back towards the deeply pessimistic levels seen earlier in the year. Both fuel prices and interest rates again look to be driving the move. Local pump prices have lifted back above $2/litre for the first time since April, reflecting higher global energy prices and the end of the temporary halving in fuel excise tax. Meanwhile, a stronger than expected monthly CPI read in July has stoked fears that the RBA will raise interest rates further in coming months. This has weighed on consumer expectations for finances and the economy. It has likely also added to unease about the continued weakening in housing markets.”
“The component detail shows a broad-based decline in September led by a pullback in current assessments of family finances… Cost of living pressures have ratcheted up again. The sub-index tracking consumer assessments of ‘family finances vs a year ago’ dropped 9.2% back to 72.6, giving back almost all of last month’s solid gain... The sub-group detail suggests the housing market downturn may also be a factor, with assessments amongst home-owners – both with and without a mortgage – down 13% in the month compared to a 0.6% rise amongst renters.”
“The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer interest rate expectations more explicitly, rose 7.3% to 170.4 in September. The move takes the index back near the levels seen in June but below May’s cycle peak of 181. Some 64% of consumers, nearly two out of every three, expect mortgage rates to increase further over the next 12 months. This is up from 59% last month. Across the mortgage belt, the share is closer to 73%, with nearly a quarter of this sub-group expecting rates to rise by more than percentage point over the next twelve months.”
“Consumers are a little uneasier about the outlook for jobs as well. The Westpac–Melbourne Institute Unemployment Expectations Index rose 2.8% to 139.4 in September, marking a further marginal deterioration (recall that higher reads on this index mean more consumers expect unemployment to rise over the year ahead). The Index is now clearly above the long-run average of 129 although it is still a long way below previous peaks which typically push well above 145. There were significantly larger rises in job loss fears amongst consumers working in the construction and hospitality sectors.”
“Housing-related sentiment remains unsettled with interest rate rise concerns and the housing market downturn clearly weighing on assessments of ‘time to buy a dwelling’ but house price expectations largely unchanged and still notably firmer than during the last housing market downturn in 2022.”
Next release: 11 am (AEDT), on Tuesday 6 October 2026
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