Australian sentiment declines in September despite finance optimism

Australia’s Westpac–Melbourne Institute Consumer Sentiment Index fell 3.1 per cent to 95.4 in September from 98.5 in August, reversing last month’s optimism following the Reserve Bank of Australia’s (RBA) third 25bps rate cut.

Despite remaining 2.5 per cent above July levels and 5.9 per cent above April’s tariff-related trough, sentiment has slipped firmly back into pessimistic territory.

Consumer expectations for the economy weakened significantly, with the ‘economic outlook, next 12 months’ sub-index down 8.9 per cent to 92.2 and the five-year outlook down 5.9 per cent to 92.7. The ‘time to buy a major item’ sub-index fell 3.4 per cent to 98.2, slipping into slightly pessimistic territory after briefly turning positive last month. Despite a 23 per cent recovery since June 2024, this measure remains well below its long-term average of 124, Melbourne Institute of Applied Economic and Social Research and Westpac said in a joint press release.

Consumers were more positive about their finances: the ‘family finances vs a year ago’ sub-index rose 2.6 per cent to 86.3, its best level since January 2022, while the ‘family finances, next 12 months’ sub-index edged up 0.9 per cent to 107.7, slightly above the long-run average.

However, job market concerns resurfaced, with the Unemployment Expectations Index climbing 4.6 per cent to 131.4, aligning with its long-run average and suggesting a stable but not improving labour market.

Westpac expects the RBA to hold the cash rate at 3.6 per cent at its September 29–30 meeting before delivering a further 25bps cut in November and two additional cuts in 2026 to support the slow consumer recovery.

ALCHEMPro News Desk (HU)