Consumers think the RBA’s interest rate hikes have ended
While pessimism still dominates, consumer sentiment read is the best since the RBA interest rate tightening phase began two and a half years ago.
THE Westpac–Melbourne Institute Consumer Sentiment Index rose 6.2% to 89.8 in October from 84.6 in September.
“This is the most promising update we have seen over the cycle to date,” according to Westpac’s Head of Australian Macro-Forecasting Matthew Hassan.
“While pessimism still dominates, the October consumer sentiment read is the best since the RBA interest rate tightening phase began two and a half years ago.
“Expectations have been buoyed by interest rate cuts abroad and more promising signs that inflation is moderating locally.
“Consumers are no longer fearful that the RBA could take interest rates higher.
“However, responses around family finances suggest progress on cost-of-living pressures – the main source of negative sentiment reads overall – is still slow.”
October saw another big shift in consumer views on interest rates.
The Westpac-Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, dropped 14.1% in October to be down by a third since July.
At 106.4, the Index is at its lowest level since the RBA was actively easing policy during COVID and on a par with the lows seen during previous periods of interest rate cuts over the last 14 years.
The detail shows just over half of consumers now expect mortgage rates to be unchanged or lower over the year ahead, compared with about a quarter back in July, Hassan explained.
The headline Consumer Sentiment Index is a measure based on five sub-indexes that capture responses to more specific questions.
Two are on family finances, two on the economic outlook and one on whether now is a good time to buy a major household item. While all sub-indexes improved in October, the biggest moves were around expectations for the economy.