In March, Australian consumer sentiment experienced a significant boost, reflecting improved household finances, a more favorable perception of the job market, and a decrease in inflation rates, as outlined by Westpac Economics, a division of the Australian bank. The Westpac-Melbourne Institute Consumer Sentiment Index rose to 95.9 in March from 92.2 in February, marking a notable recovery from last year's 78.5.
With the index approaching the neutral level of 100, this indicates that consumers are gradually shedding their negativity. 'At 95.9, the Consumer Sentiment Index is now at a three-year high and just 4% off the 'neutral' level of 100, where there are the same number of optimists as pessimists,' stated Westpac.
Australians have shown increasing economic confidence since the second half of 2024; however, consumer sentiment has faced some challenges. 'The recovery in consumer sentiment, which began in the second half of last year but lost its way a little over the Christmas-New Year period, regained momentum in March,' added Westpac.
March data reveals a positive outlook among Australian consumers regarding their household finances over the next 12 months. The subindex for 'family finances in the next 12 months' rose to 108.3 in March, increasing from 105.0 in February and a considerable rise from 85.3 a year prior. Conversely, Australians remain cautious about their current financial situations, with the 'family finances versus a year ago' subindex at 76.7 in March.
Although this is an improvement from February's 75.1, it still indicates a pessimistic outlook. The recent decline in inflation rates in Australia, coupled with interest rate cuts by the Reserve Bank of Australia (RBA), has also contributed to the lift in sentiment. 'The RBA's decision to cut interest rates in February and a further easing in cost-of-living pressures have provided a clear lift,' commented the bank.
Australian consumers are also optimistic about home prices rising in the near future, yet they do not view March as a suitable time to purchase a home. The 'house price expectations' subindex reached 146.5 in March, a rise from 142.3 in February and significantly up from 111.7 the previous year. However, the 'time to buy a dwelling' subindex recorded at 91.6 in March, which is considerably below the long-term average of 1200, as reported by Westpac..