Consumer spending is showing strong signs of life, but don’t call it a turnaround just yet.

The Westpac–Melbourne Institute consumer sentiment index jumped 5.7% to 98.5 in August. That was its highest reading since early 2022, although it was still just under the neutral 100 mark.

Sub-indexes across the board improved. The one-year economic outlook surged 7.6%, the five-year outlook went up 5.4%, and the “time to buy a home” index jumped 10.5%. Those figures suggest that Australians are increasingly upbeat about the future and are becoming more inclined to loosen the purse strings.

ANZ-Roy Morgan’s Australian Consumer Confidence Index paints a similarly encouraging picture. The AFR reported it rose 2.0 points last week to 88.0.

It appears that Westpac’s monthly survey is reflecting broader optimism following rate cuts and easing inflation, suggesting that consumers feel better about big-ticket items and the housing market.

Things finally seem to be looking up

ANZ economist Sophia Angala noted that the improving figures in the ANZ-Roy Morgan index were driven by a big jump in the survey’s ‘Time to buy a major household item’ subindex.

But the ANZ–Roy Morgan index suggests Australians still feel a little tender after years of being battered by cost-of-living pressures.

Many are presumably still experiencing sticker shock when doing their weekly grocery shop, given post-COVID inflation and price increases.

Nonetheless, it seems falling interest rates and falling inflation are belatedly shifting the national mood.

Australian consumers are still cautious. Consumer confidence remains fragile.

But the latest survey results give retailers reason to hope that they are in for a strong Christmas shopping season.