Consumers begin 2026 in ‘downbeat mood’: Westpac
Make us a preferred source
Make us a preferred source on Google
The news: Australian consumer sentiment slipped in January amid deteriorating views on the near-term outlook for the economy and as two thirds of consumers expect mortgage rates to rise this year, according to the Westpac-Melbourne Institute Consumer Sentiment Index.
The numbers: The index took a month-to-month fall of 1.7% to 92.9 in January. A value below 100 indicates there were more pessimists than optimists surveyed.
The ‘economic outlook, next 12 months’ sub-index fell by 6.5% while the ‘family finances, next 12 months’ sub-index fell by 4.5%. However, the sub-index for ‘family finances was a year ago’ lifted by 2.3%.
The sub-indices for ‘economic outlook, next 5 years’ (+0.9%) and ‘time to buy a major household item’ (+0.2%) both ticked up.
All consumer sub-indices were below 100, the second time this has happened since October 2024.
When it comes to homebuyer sentiment the ‘time to buy a dwelling’ sub-index also rose by 4% to 89.6, with homebuyer sentiment among those aged 18-34 years old lifting 5.7% to 103.9.
The context: Westpac head of Australian macro-forecasting Matthew Hassan said that Australian consumers “entered the new year in a downbeat mood, sentiment moving further into pessimistic territory in January”, with the main catalyst being “a sharp turn in interest rate expectations”.
More than two thirds of consumers expect mortgage rates to be lifted in the next 12 months, which is more than double the share in September 2025.
Hassan flagged that confidence “is still well above the extreme lows” registered during the “protracted ‘cost of living’ crisis” between 2022 and 2024.
Despite recent inflation spikes however, Hassan said that broader data “points to a labour market that is softening and to limited price pressures for a range of market goods and services”. This could justify a cash rate hold for the whole of 2026.
