Australia’s consumer sentiment improved in August, marking the second consecutive monthly increase as the Reserve Bank of Australia (RBA) maintained its cash rate at 4.35%, according to data released by Westpac in collaboration with the Melbourne Institute.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose 2.0% to 85.5 in August, up from 83.8 in July. The index remains well below its long-term average of 100, reflecting persistent concerns over cost-of-living pressures and economic uncertainty. Westpac chief economist Luci Ellis noted that while the improvement was encouraging, households continue to face financial strain amid elevated inflation and higher borrowing costs.
The RBA has held its benchmark rate steady since November 2023, after a series of aggressive hikes that pushed borrowing costs to a 12-year high. The central bank’s decision to pause was influenced by signs of cooling inflation and weaker-than-expected economic growth. Despite the pause, the RBA has signaled that further rate adjustments remain data-dependent, leaving consumers cautious about future financial conditions.
The survey’s sub-index tracking household finances over the next 12 months improved by 3.8%, though it remained in negative territory at 78.6. Expectations for economic conditions over the same period also rose by 1.9% to 91.2, yet optimism about the economy’s outlook remains subdued. The index tracking unemployment expectations fell by 1.2% to 125.2, suggesting slightly less concern about job security.
Analysts suggest the modest improvement in sentiment may reflect temporary relief from the RBA’s pause rather than a fundamental shift in household confidence. With inflation still above the RBA’s target range and wage growth lagging, consumers are likely to remain cautious in their spending and borrowing decisions.
