The Westpac-Melbourne Institute Consumer Sentiment Index climbed 5.7% in August to 98.5, its highest level in three and a half years.
Westpac attributed the improvement to the Reserve Bank of Australia’s (RBA) third rate cut in July, describing it as a “clear boost” that may signal the “long period of pessimism finally coming to an end”.
Matthew Hassan, Westpac’s head of Australia macro-forecasting, said: “It has been 42 months since Australian consumers last registered a Sentiment Index read above 100 – the second longest period of continuous pessimism since our survey began in 1974, second only to the deep recession of the early 1990s. This long run of consumer pessimism may finally be coming to an end.”
Consumers reported less concern about their household finances. The ‘family finances vs a year ago’ sub-index rose 6.2% to 84.2, close to its long-run average of 88, while the ‘family finances, next 12 months’ measure increased 5.4% to 106.8, slightly above its long-term average.
Hassan noted that gains were not led by mortgage holders, but by renters: “Some of the strongest improvements in the August month were amongst renters, suggesting that easing cost-of-living pressures, including slower growth in rents, has also been a positive. That said, the mortgage belt has seen a bigger improvement in sentiment around finances since the middle of last year.”