Australian consumer sentiment slips back into pessimism in December

Australian consumer confidence weakened sharply in December as the Westpac–Melbourne Institute Consumer Sentiment Index fell 9 per cent to 94.5 from 103.8 in November. The decline erased last month’s surprise bounce, which had delivered the first net positive reading since the economy reopened after the pandemic, according to the Westpac-MI Consumer Sentiment December report.

Rising inflation concerns, renewed anxiety over interest rates, and softer views on household finances and the economic outlook weighed on sentiment. However, consumers remained broadly calm about labour market prospects.

Despite recent volatility, the index ended the year broadly in ‘cautiously pessimistic’ territory, close to levels seen before November’s spike. While confidence has improved from the deep and prolonged pessimism that dominated much of 2024, a sustained shift into outright optimism remains out of reach for Australian consumers.

Consumers remained broadly unfazed about labour market prospects. The Westpac–Melbourne Institute Unemployment Expectations Index fell 9.1 per cent to 126.8 in December. As higher readings indicate a greater share of consumers expecting unemployment to rise over the year ahead, the decline brings the index slightly below its long-run average, pointing to expectations of a broadly stable labour market.

Additional quarterly questions on news recall shed light on the drivers behind the fall in sentiment. Inflation remained the most prominent topic for consumers, with recall higher than in September and the tone turning decisively negative. Around 78 per cent of respondents viewed inflation-related news as unfavourable, reflecting recent upside surprises in third quarter (Q3) inflation data and a strong initial reading from the new monthly CPI for October.

Sentiment around interest rate news also deteriorated notably. Some 64 per cent of respondents assessed coverage as unfavourable, up sharply from 44 per cent in September and 46 per cent in June.

News related to domestic economic conditions and employment was also perceived more negatively than three months earlier. Meanwhile, international conditions faded as a concern, with recall dropping to its lowest level this year.

The tone of global news was the least unfavourable since June 2024, helped by easing trade tensions among Australia’s major trading partners.

ALCHEMPro News Desk (HU)