Australian Consumer Sentiment Declines in January

SYDNEY (Reuters) – Australian consumer sentiment dipped for a second month in January as financial stress dominated at the start of the new year, a survey showed on Tuesday, suggesting spending will remain subdued in the near term.

The Westpac-Melbourne Institute index of consumer sentiment fell 0.7% in January from December, when it dropped 2.0%. The index is still up 13.8% year-on-year, but at 92.1, it indicates that pessimists outnumber optimists.

This cautious outlook may reassure the Reserve Bank of Australia that consumers are not about to rush out spending and stoke inflation, leaving the door open for potential easing of monetary policy in the coming months.

The survey breakdown revealed that the biggest hindrance was the assessment of family finances compared to a year ago, which sank 7.8% to 77.7 in December due to high mortgage rates offsetting the impact of tax cuts in 2024.

On the brighter side, the index of family finances for the next 12 months rose 1.1% to 104.4, showing that optimists outnumber pessimists.

Westpac chief economist Luci Ellis noted, “The consumer mood has soured for two months in a row and remains on the pessimistic side; however, sentiment is still less negative than a year ago, and some components suggest consumers expect improvement.”

The survey’s measure of the economic outlook for the next 12 months was stable in December, while the five-year outlook edged up by 0.7%. Moreover, the measure of whether it was a good time to buy a major household item rose 1.8%, although it remains historically weak at 90.8.