Australia consumer sentiment takes turn for worse

The Westpac-Melbourne Institute index of consumer sentiment fell 1.3% in January, from December, when it rose 2.7%. — Reuters

SYDNEY: Australian consumer sentiment took a turn for the worse in January as cost-of-living pressures and higher mortgage rates stoked concerns over finances, a survey shows.

The Westpac-Melbourne Institute index of consumer sentiment fell 1.3% in January, from December, when it rose 2.7%. The index reading of 81.0 showed pessimists greatly outnumbered optimists, much as it did over all of 2023.

The breakdown showed female respondents were much more pessimistic than males, as were those over 45 and those renting or with mortgages.

“For consumers, the new year looks to have picked up where the old one left off: cost of living and high interest rates continuing to dominate and sentiment bumping around deeply pessimistic levels,” said Matthew Hassan, a senior economist at Westpac.

Interest rates are at a 12-year high of 4.35%, having been last raised in November, and the Reserve Bank of Australia has left the door open to further tightening if necessary.

The pressure was evident in the survey’s measure of family finances compared to a year earlier, which slid 7.6% in January to 63, far below the 100 midpoint that separates pessimists from optimists.

“Many consumers may be facing a bigger than usual post-Christmas financial ‘hangover’ as the full impact of the higher cost-of-living on festive season spending becomes apparent,” said Hassan.

The outlook for finances over the next 12 months was brighter with a rise of 2.9%, while the outlook for the economy for the year ahead also rose 3.9%.

However, consumers were gloomy on the outlook for the next five years, which dropped 6.1%.

The measure of whether it was a good time to buy a major household item dipped 0.3% and was down 10% on a year earlier. — Reuters