Consumer sentiment improves on rates reprieve
- Westpac–Melbourne Institute Consumer Sentiment Index up 6% to 88.9 in August.
- Overall result is still pessimistic and below last year’s levels.
- Increase driven by people with mortgages post RBA decision to hold, while renter sentiment falls modestly.
- Unemployment expectations rise above long-run average, partly reversing last month’s fall.
- House price expectations decline as market weakens. Renters less likely to expect price falls and more downbeat about home purchases.
“The Westpac–Melbourne Institute Consumer Sentiment Index rose 6% to 88.9 in August from 83.9 in July.”
“This is still a weak result and noticeably lower than the readings recorded last year. While consumers are feeling less pessimistic than last month, pessimists still outnumber optimists, especially about their current finances. The improvement in forward-looking views was also much less pronounced than for the questions covering current conditions. This suggests that pervasive uncertainty, including about the Middle East, is still weighing on sentiment to some extent.”
“The gain was concentrated among people with mortgages, and in responses received after the RBA decision on 11 August. Responses received before the decision were little changed compared with July, with all the monthly improvement emerging afterwards. Sentiment among renters increased after the RBA meeting, but the pre-meeting read was below the July outcome, leaving renter sentiment down a little in the month overall.”
“A majority (59%) of all respondents nonetheless still expect further increases in mortgage interest rates, with this share little changed after the meeting or compared with last month. However, the meeting outcome seems to have provided some clarity, with fewer respondents saying they did not know, and the share expecting mortgage rates to decline or stay the same lifting to nearly 28% after the meeting, versus 21% before it.”
“Last month’s more comforting view of the labour market has partly unwound. The Westpac–Melbourne Institute Unemployment Expectations increased to 135.7 in August from 129.9 in July, an increase of 4.4%. This is a little above the long-run average, though still slightly below the readings seen over April–June. The increase was driven by female respondents but broadly based across age groups and occupation categories other than manager/professionals.”
“Housing-related sentiment was further supported by the more benign outlook for interest rates but remains pessimistic overall. The ‘time to buy a dwelling’ index rose 12.1% to 95.7, the highest since November 2025 but still below the long-run average of 119. The increase was broad-based across states and cities and saw the readings for Sydney and Melbourne both edge back over the 100 mark. The index is lower for consumers in non-metro areas, as has been the case for most of the post-pandemic period. This is possibly because these regions are yet to see as much of a price correction as has already occurred in some major cities, so affordability feels more stretched. The index also fell slightly in the month for renters, though it has clearly recovered from the trough reached earlier in the latest phase of RBA rate hikes.”
“Sentiment about home purchase is also being supported by expectations of future housing price moderation. The Westpac–Melbourne Institute Index of House Price Expectations fell again in August to record a fresh three-year low of 110.8. The decline was broad-based across states, but especially marked for outright owners, who are much more likely (43.5%) to expect housing prices to fall than people with a mortgage (27.2%) or renters (21.1%). These less negative views about future housing price moves are likely contributing to renters’ more downbeat views of whether now is a good time to buy a home, and more broadly, their chances of achieving home ownership in future.”
Next release: 11 am (AEST), on Tuesday 8 September 2026
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