The composition of the gain matters more than the headline 6% rise, since it was concentrated almost entirely among mortgage holders and emerged only after the RBA’s 11 August hold decision, with pre-decision responses barely changed from July. That points to a relief reaction tied specifically to the rate outcome rather than a genuine broad-based improvement in household confidence, reinforced by the index still sitting well below year-ago levels and pessimists continuing to outnumber optimists on current finances. The unemployment expectations reversal, rising back above the long-run average after last month’s improvement, is arguably the more consequential detail for the RBA’s own reaction function, since labour market deterioration expectations feed directly into the central bank’s calculus on how much further tightening the economy can absorb. With 59% of respondents still expecting further mortgage rate increases largely unchanged by the RBA decision, the survey suggests households have not meaningfully repriced their own rate outlook even as the central bank paused, leaving scope for sentiment to remain fragile into the next meeting.
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Earlier:
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Consumers are feeling a little less gloomy since the RBA held rates, but the improvement is narrow, mortgage holder specific, and nowhere near enough to lift the overall mood out of pessimistic territory.
Summary:
- The Westpac-Melbourne Institute Consumer Sentiment Index rose 6% to 88.9 in August from 83.9 in July, though the result remains pessimistic and well below last year’s levels
- The gain was concentrated among people with mortgages and among responses received after the RBA’s 11 August decision to hold rates, with pre-decision responses barely changed from July
- Renter sentiment improved after the RBA meeting but fell overall for the month, as pre-meeting readings came in below July’s level
- Unemployment expectations rose above the long-run average, partly reversing last month’s improvement
- House price expectations declined as the market weakens, with renters less likely to expect price falls and more downbeat about home purchases
- The improvement in forward-looking views was much smaller than for questions on current conditions, suggesting ongoing uncertainty, including around the Middle East, is still weighing on sentiment
- 59% of respondents still expect further mortgage rate increases, a share largely unchanged by the RBA decision, though the share expecting rates to decline or hold steady rose to nearly 28% after the meeting from 21% before it
Australian consumer sentiment improved in August but remains firmly in pessimistic territory, with the Westpac-Melbourne Institute Consumer Sentiment Index rising 6% to 88.9 from 83.9 in July. The result is still noticeably lower than readings recorded a year ago, and pessimists continue to outnumber optimists overall, particularly on questions about current household finances.
The improvement was narrowly based. Gains were concentrated among respondents with mortgages, and specifically among those surveyed after the Reserve Bank of Australia’s decision on 11 August to hold the cash rate steady. Responses collected before the meeting were little changed from July, meaning the entire monthly improvement emerged in the days following the RBA’s announcement. Renter sentiment told a different story, rising after the meeting but still finishing the month lower overall, as pre-meeting responses had already come in below July’s level.
The survey’s forward-looking components improved by far less than its current conditions questions, a gap Westpac says points to lingering uncertainty, including geopolitical tensions in the Middle East, still weighing on household confidence. Unemployment expectations added to that cautious picture, rising back above the long-run average and partly reversing an improvement recorded the previous month. House price expectations also softened as the property market weakens, though renters were both less likely to anticipate price falls and more downbeat about their own prospects of buying a home.
On rates specifically, the RBA’s hold decision appears to have sharpened rather than shifted household expectations. A majority of respondents, 59%, still expect further increases in mortgage rates, a share little changed either after the meeting or compared with the prior month. What did shift was clarity: the proportion of respondents saying they did not know what would happen to rates fell, while the share expecting rates to decline or hold steady rose to nearly 28% after the meeting, up from 21% beforehand. Taken together, the results suggest the RBA’s pause offered households some reassurance without meaningfully changing the underlying view that further tightening remains likely.
This article was written by Eamonn Sheridan at investinglive.com.