Consumer sentiment recovery resumes
- Westpac Consumer Sentiment Index up 4% to 95.9 in March.
- Slowing inflation and rate cut lift confidence to three-year high.
- Unsettling overseas news looks to be weighing on the outlook for the economy.
- Consumers' own finances stabilising with a further improvement expected.
- Positive view on jobs suggests ‘soft landing’ has been achieved.
“The Westpac–Melbourne Institute Consumer Sentiment Index posted a solid 4% rise in March, lifting to 95.9 from 92.2 in February.”
“The recovery in consumer sentiment, which began in the second half of last year but lost its way a little over the Christmas–New Year period, regained momentum in March. The RBA’s decision to cut interest rates in February and a further easing in cost-of-living pressures have provided a clear lift. The survey detail shows a broad-based improvement with a notable rise in confidence around the labour market outlook. At 95.9, the Consumer Sentiment Index is now at a three-year high and just 4% off the ‘neutral’ level of 100, where there are the same number of optimists as pessimists.”
“Despite the improvement, there are still some signs of unease, particularly around developments abroad. Our March, June, September and December surveys include additional questions on news recall. Responses in March show that while consumers detected a marked improvement in the domestic news-flow, the news from abroad has become more troubling… The component detail of the Index suggests this unease is holding back consumer expectations for the economy.”
“In terms of wider consumer sentiment, the sub-group detail suggests there were some other factors at play in the month. In particular, Cyclone Alfred dampened the mood in Brisbane, sentiment in the city dipping 1.7% in the month, bucking the wider rising trend.”
“The RBA’s February decision has bolstered confidence that interest rates will continue to move lower. The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, declined 2.2% to 88.2 in March, reaching a new cycle low. The detail shows 36% of consumers expect mortgage rates to decline over the next year; 22% expect no change and 26% expect rates to move higher.”
“Consumers are becoming more positive on the labour market, expectations suggesting a ‘soft landing’ has already been achieved. The Westpac–Melbourne Institute Unemployment Expectations Index dropped 6.3% to 117.9 in March (recall that lower index reads mean more consumers expect unemployment to fall over the year ahead).”
“The RBA’s February rate cut drove a solid lift homebuyer sentiment. The ‘time to buy a dwelling’ index rose 4.3% to 91.6. While that still means pessimists outnumber optimists, this is the lowest incidence of pessimism since September 2021.”
“Consumers are more firmly positive on the house price outlook. The Westpac–Melbourne Institute Index of House Price Expectations rose 2.9% to 146.5 in March, the Index now having bounced nearly 10% from its January low. That said, consumers are not as bullish as they were last year – just over 59% expect prices to rise in the year ahead, compared to 53% two months ago but a peak of over 70% back in June.”
The Westpac–Melbourne Institute Consumer Sentiment Index for March 2025 was released at 11 am (AEDT), on Tuesday 11 March 2025. The index for April 2025 will be released at 11 am (AEDT), on Tuesday 8 April 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.