Australian consumer sentiment retreated in December, according to a recent Westpac-Melbourne Institute survey. Despite improvements in personal finances, anxieties about the economic outlook contributed to the decline. The index fell 2.0% in December to 92.8, indicating pessimists outnumber optimists, although it remains 13% higher than a year ago.
Table Content:
Economic Outlook Weighs on Confidence
Westpac Senior Economist Matthew Hassan attributed the dip in sentiment to a weaker-than-expected economic growth report released earlier in December. This negative economic news impacted consumer perspectives, with the index measuring the economic outlook for the next 12 months falling 9.6%. The five-year outlook also decreased by 7.9%.
Personal Finances Show Improvement
Despite the overall decline in sentiment, the survey revealed positive trends in personal finances. The measure of family finances compared to a year ago rose 6.9%, likely influenced by tax cuts implemented in July. This suggests that while consumers feel more positive about their current financial situation, concerns about the broader economy are tempering overall confidence.
Mortgage Holders Express Uncertainty
The decline in sentiment was most pronounced among mortgage holders, reflecting uncertainty surrounding potential interest rate reductions. The Reserve Bank of Australia maintained interest rates at 4.35% throughout the year. While the bank signaled a possible easing as early as February, the timing remains uncertain, contributing to consumer hesitancy.
Mixed Signals in Spending Intentions
The survey presented mixed signals regarding consumer spending. The “time to buy a major household item” index saw a 4.8% increase, yet remained below the neutral 100 mark. Conversely, ANZ reported a 1.6% drop in its confidence index, primarily due to decreased shopping intentions following the Black Friday sales period. These contrasting trends highlight the complex interplay of factors influencing consumer behavior.
Housing Market Sentiment Remains Subdued
Reflecting the impact of high mortgage rates and affordability challenges, Westpac’s time to buy a dwelling index decreased by 6.0% in December, reaching a pessimistic 81.6. This suggests that the housing market continues to face headwinds, contributing to the overall subdued consumer sentiment.
Conclusion: Cautious Optimism Tempered by Economic Concerns
While improvements in personal finances offer a positive sign, lingering anxieties about the economic outlook have dampened Australian consumer confidence in December. The survey findings underscore the sensitivity of consumer sentiment to economic data and policy decisions, highlighting the need for continued monitoring of these factors. Uncertainty surrounding interest rates and housing affordability also contribute to the cautious outlook.
