Consumer confidence in Australia remains “weak by historical standards” according to Westpac’s latest report, despite a slight uptick in positive sentiment.

The Westpac–Melbourne Institute Consumer Sentiment Index rose 2.8% to 85 in August from 82.7 in July, just outside the 76-84 range that the bank described in July as “the same deeply pessimistic range that has dominated for two years now”.

In the Westpac Consumer Confidence survey, the diving line between optimism and pessimism is set at 100, meaning numbers under 100 represent greater negativity than positivity.

“Consumers breathed a small sigh of relief in August as the RBA Board left interest rates unchanged and the support coming from tax cuts and other fiscal measures became more apparent,” said Matthew Hassan, Westpac’s Head of Australian Macro-Forecasting.

“That said, the Index remains at weak levels by historical standards.”

Hassan said the survey “shows that cost of living and rate rise concerns are still weighing heavily”.

Westpac Consumer Confidence Report August 2024.

But he said the component indexes that make up the report show a clear improvement in the latest sentiment data centred around family finances.

“The ‘family finances vs a year ago’ sub-index surged 11.7% in August, the biggest monthly gain in nine years (excluding the COVID period), lifting the sub-index to 70.9 – a two year high, albeit still a very weak level overall.”

The monthly rise was particularly strong amongst low-income earners; 18–34 year olds and those aged over 65; and in South Australia, Queensland and Victoria.

Looking ahead, consumer expectations for their finances also improved, with the ‘family finances, next 12 months’ sub-index rising 5.1% to 96.8. This is the highest level since the long run of interest rate rises began in May 2022.

“While these monthly moves are impressive, both ‘family finances’ sub-indexes were coming off sizeable declines and extremely weak levels in July,” Hassan said. 

He said that even with these gains the August reads on both family finance sub-indexes were still in the bottom 15% of monthly readings since the series began in the mid-1970s. 

Meanwhile, consumers are “a little less pessimistic about the near term economic outlook but a little more downbeat on the medium term view, with buyer sentiment largely unchanged at very weak levels”.

Employment-wise, Hassan said that overall sentiment around jobs “is a touch worse than long run averages but still consistent with gradual slowing in labour market conditions”.

“That said, the detail suggests there is more unease amongst those employed in professional services, the public sector and in hospitality and recreational services while job-loss fears have eased materially amongst those employed in construction.” 

Westpac Consumer Confidence. Artwork: ChannelNews.

Around housing, homebuyer sentiment sank. The ‘time to buy a dwelling’ index fell 5.8% to 71.4, a new low for the year. Buyer sentiment dropped to exceptionally weak levels in NSW (66.1) but is a little less bleak in Victoria (76.9) and South Australia (76.0), Westpac said.

Nationally, the index has been at extremely weak levels, at or below the 80 mark, for two and a half years, “the most sustained period of depressed homebuyer sentiment over the history of the survey. The average index read over the last 50 years is 120”.

The Reserve Bank Board next meets on September 23–24 and Hassan said “it seems likely that the Board will hold the cash rate unchanged”.