The Westpac-Melbourne Institute Consumer Sentiment Index slipped 1.8% to 84.4 in March, reversing the gains posted in the previous month when it saw the highest lift since mid-2023. 

Pessimists have been outweighing optimists since March 2022 when the index started to fall below the neutral mark of 100. 

Similarly, ANZ-Roy Morgan Australian Consumer Confidence found the short-term economic confidence (outlook over the next 12 months) declined by 1.1 pts. 

The latest four-week average of ANZ-Roy Morgan Consumer Confidence stood at 82.0.   

“Consumers are still deeply pessimistic and becoming more concerned about the economy's near-term outlook,” Westpac senior economist Matthew Hassan said. 

But it wasn’t until last week, after the RBA’s second meeting ended with the cash rate unchanged, that the sharpest drop in consumer confidence was noted. 

Sentiment among those surveyed by the Westpac-MI nosedived to 79.3 from 94.9 before RBA Governor Michele Bullock made the announcement. 

“The implication is that while few would have been expecting rates to be cut, many consumers may have been hoping for a more positive message on inflation and the interest rate outlook,” Mr Hassan said. 

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Westpac senior economist Matthew Hassan (left) and ANZ senior economist Madeline Dunk

Despite the slight shift in a more dovish direction, the RBA boss maintained in her post-meeting statement that the Board would like to keep its options open, not ruling out the possibility of further rate increases if inflation doesn’t return to target in a reasonable timeframe. 

The 2023 final quarter CPI showed inflation had slowed faster than the RBA expected, while the latest monthly read revealed the annual rate is tracking towards the central bank’s target band after it remained steady at 3.4% in January. 

“We’re not confident enough to say we can rule out further interest rate changes, but we do think we’re on the path to get ourselves back to inflation in target within our forecast period,” Ms Bullock said. 

And whether the trend continues will be revealed tomorrow when ABS releases the latest monthly CPI read. 

RBA’s messaging keeps Aussies anxious

“The RBA’s commentary looks to be tempering consumer expectations for interest rates as well, with fears of rate hikes easing but few expecting rate cuts anytime soon,” Mr Hassan noted. 

Borrowers have long been keeping their hopes up for cash rate cuts to begin since it peaked in 2023. 

However, as prospects dim, so has their confidence. 

The Westpac-Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, dipped 0.5% to 120.9. 

The mix of responses shows that 40% of consumers are still bracing for rate increases, higher compared to 22% who expect no change and 22% who foresee declines.

Meanwhile, the survey’s House Price Expectations index showed nearly 70% of consumers expect housing prices to continue rising in the year ahead. 

But more consumers feel confident about buying a home

Despite a gloomy near-term outlook for the economy, consumers are feeling more and more confident about buying a home with another lift in assessments of ‘time to buy’.

The ‘time to buy a dwelling’ index rose 4.9% to 77.8, a 15-month high.

Buyer sentiment is notably stronger in Victoria (84.3) where Melbourne housing prices have fallen over the last four months. 

CoreLogic’s Home Values Index revealed Melbourne home prices fell 0.6% over the previous quarter. 

In contrast, the NSW index is at just 73.3. Continued gains in Sydney dwelling prices – up 10.6% annually –  and the associated deterioration in affordability are weighing more heavily. 

Meanwhile, confidence among renters also improved, the ANZ-Roy Morgan survey found. 

“Confidence amongst renters lifted 7.1 points to its highest level since early January,” ANZ economist Madeline Dunk noted.

But with still critically low vacancy rates, the gloom still looms over those who rent. 

“Renters remain the least confident among the three housing cohorts – currently at 3 points lower compared to households paying off mortgage,” she said.

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