Australia’s consumer sentiment rebounds in June – survey

Australian consumer sentiment experienced a modest rebound in June, buoyed by the promise of imminent tax cuts. However, concerns over potential increases in borrowing costs lingered in the background.

The Westpac-Melbourne Institute index of consumer sentiment rose by 1.7 per cent in June compared to May, when it saw a slight decline of 0.3 per cent. Despite this improvement, the index reading of 83.6 indicated that pessimists still outnumbered optimists, a trend that has persisted for several months.

Announcements of additional cost-of-living aid from state governments likely contributed to the improved sentiment ahead of a significant income tax cut scheduled for July 1.

However, the survey period included a meeting of the Reserve Bank of Australia (RBA), which cautioned that there were risks of inflation rising and that another interest rate hike could not be ruled out.

The survey revealed a steep drop in sentiment to 80.1 following the RBA’s decision, down from 90.0 before the announcement. The percentage of respondents anticipating higher mortgage rates in the next 12 months increased to 48.3 per cent from 43.5 per cent in May.

“The survey details suggest that the positive effects of fiscal support measures are being offset by growing concerns about inflation and the outlook for interest rates,” said Westpac senior economist Matthew Hassan.

While budget relief led to an uptick in measures of family finances, the overall economic outlook remained deeply pessimistic.

The index measuring whether it was a good time to purchase major household items increased by 4.2 per cent, but at 79.7, it remains significantly below its long-term average of 124.

Attribution: Reuters