Consumer pessimism eases a little
- Westpac–Melbourne Institute Consumer Sentiment Index up 4.1% to 83.9.
- Pessimism still dominates but fuel price pressures and rate rise fears moderate.
- Consumers remain gloomy on economy and major purchase decisions.
- Job-loss concerns subside, unemployment expectations back near average.
- Homebuyer sentiment continues to recover from extreme lows but consumers less certain about house price outlook.
“The Westpac–Melbourne Institute Consumer Sentiment Index rose 4.1% to 83.9 in July from 80.6 in June.”
“Despite the gain, sentiment remains deeply pessimistic. At 83.9, the latest Index read is still in the bottom 10% of results over the 50-year history of the survey. Some of the July improvement looks to be relief that ‘worst case’ scenarios – around energy prices, interest rates and jobs – are not playing out. However, family finances are clearly under intense pressure and the outlook is uncertain. Sentiment also remains hostage to developments abroad with daily responses showing a significant weakening as the situation in the Strait of Hormuz deteriorated over the course of the survey week.”
“The component detail shows a less negative assessment of family finances but little change in gloomy views about major purchases and the wider economy… Cost of living pressures seem to have eased a little. The ‘family finances vs a year ago’ sub-index rose 5.6% to 71.1 but is still 14% below its pre-war and interest rate rise levels at the start of the year. Lower fuel prices look to be the main driver of the July gain, average pump prices nationally declining to $1.60/litre in the survey week, unwinding all of the Middle East war spike.”
“Consumers are much less fearful about their finances over the year ahead. The ‘family finances, next 12 months’ sub-index posted a particularly strong 13.4% rebound to 96.5. While that is still regaining the ground lost in April, the index level is now consistent with marginal rather than widespread pessimism.”
“The shifting rates view shows through clearly in the Westpac–Melbourne Institute Mortgage Rate Expectations Index… The index fell a further 5.8% to 162.6 in July to be down 10% from May’s peak. Most consumers, around 60% of those surveyed, expect mortgage rates to increase further over the next 12 months. However, this is down from the 66% share in June, with most of that move coming from a decline in those expecting mortgage rates to rise by more than 1 percentage point.”
“While they are still downbeat on the economy, consumers are more comfortable about the labour market outlook. The Westpac–Melbourne Institute Unemployment Expectations Index dropped 7.1% to 129.9 in July, marking a significant improvement. The Index is now back around the long-run average read of 129.”
“Housing-related sentiment remains very unsettled with assessments of ‘time to buy’ lifting but still deeply pessimistic overall and housing price expectations continuing to decline.”
“The ‘time to buy a dwelling’ index rose 5.3% to 85.4 in July, having already bounced 12.6% in June. However, this is still only recovering from the extremely weak May read of 72, which was nearly 50pts below the long-run average of 119.”
“Fewer consumers expect dwelling price gains to continue. The Westpac–Melbourne Institute Index of House Price Expectations fell 8% to 118, a new three-year low. Consumers are now uncertain about the outlook for prices with 47% of those surveyed expecting prices to rise over the next 12 months, 19% expecting no change, 29% expecting prices to decline and 6% reporting “don’t know”. This is the first time since March 2023 that there was not an outright majority of consumers expecting prices to rise. Consumer dwelling price expectations pulled back in every state.”
Next release: 11 am (AEST), on Tuesday 18 August 2026
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