Australian shoppers are at their most upbeat since the Reserve Bank started lifting official interest rates more than two years ago amid signs inflation pressures are easing.
The closely watched Westpac-Melbourne Institute measure of consumer sentiment, released this morning, jumped by 6.2 per cent in October.
While pessimists still out-number optimists, Matthew Hassan, Westpac’s head of Australian macro forecasting, described the increase as the “most promising update” since the RBA started lifting rates in May 2022.
Shoppers in Melbourne.Credit: Luis Enrique Ascui
“Expectations have been buoyed by interest rate cuts abroad and more promising signs that inflation is moderating locally,” Hassan said.
“Consumers are no longer fearful that the RBA could take interest rates higher.”
The big lift may soothe concerns within the government which is being blamed for the high cost of living.
This masthead’s Resolve Political Monitor released today showed 36 per cent of respondents said it was the government’s fault for their rising living costs compared to just 13 per cent who blamed factors outside of Australia’s control.
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Financial markets say there is a good chance the Reserve will use its mid-December meeting to cut the cash rate while many economists believe mortgage relief will likely start in February next year.
The consumer sentiment measure of mortgage rate expectations, which tracks what borrowers are expecting to happen to interest rates, dropped 14.1 per cent in October to be down by a third since July.
One of the reasons for the drop is a sharp slowdown in inflation.
The Melbourne Institute’s monthly measure of inflation, which closely tracks the official measure of inflation, rose by 0.1 per cent in September to be up 2.6 per cent over the past 12 months. Its measure of underlying inflation also increased by 0.1 per cent in the month and is up just 2.2 per cent over the past year.
While inflation is moderating, families are continuing to struggle.
The consumer sentiment measure of family finances compared to a year ago was up just 2.8 per cent in October.
“The picture here is still of intense cost-of-living pressures but with the forward view indicating that consumers expect the situation to stabilise over the year ahead,” Hassan said.