Australian consumer confidence remains low amid financial strains, while businesses show cautious optimism despite mixed economic signals.
The Westpac-Melbourne Institute Consumer Sentiment Index reported a marginal increase in February, edging up 0.1% to 92.2 from 92.1 in January.
“The consumer mood improved materially over the second half of 2024, but the recovery has stalled in the last three months,” said Matthew Hassan (pictured top left) of Westpac.
This stagnation is attributed to ongoing financial pressures and a challenging global environment, which have maintained a “cautiously pessimistic” consumer mood.
Hassan explained the complex sentiment.
“Much of that caution still centers around stretched household finances,” he said, indicating a significant financial strain affecting various demographics, especially low-income earners, females, and young adults aged 18-24.
Consumers have shown growing confidence in potential interest rate cuts, as evidenced by the significant decrease in the Westpac-Melbourne Institute Mortgage Rate Expectations Index, where 36% of consumers now expect mortgage rates to decline over the next year.
However, despite some positive adjustments in economic outlook sub-indexes, a general unease about the global economic conditions continues to dampen the overall sentiment.
Ryan Wells (pictured top right) from Westpac commented on the broader economic challenges reflected in the latest NAB business survey results.
“Conditions have been easing gradually but consistently since 2022,” Wells said.
According to the report, broad trends continued to show sluggish growth and an uncertain economic outlook with business conditions falling by 3 points to +3 and confidence increasing by six points to +4.
“Confidence rose solidly when most other measures were weak and is now almost back at its long-run average,” said Alan Oster (pictured bottom left) from NAB.
This suggests a cautious optimism is emerging among businesses, possibly due to easing cost pressures and a stabilising employment landscape.
Business conditions varied across industries, with notable declines in mining and retail but improvements in transport and utilities.
“Capacity utilisation fell to its lowest reading in three years and is now close to its long-run average,” Oster said, indicating a shift towards a more balanced economic state.
Despite these pressures, there is a slight uptick in labour costs, suggesting ongoing challenges in managing operational costs against profitability.
The ANZ-Roy Morgan Consumer Confidence index also reflected a decline, dropping to 86.7 as concerns about the economy intensified.
“Current financial conditions are the lowest since July 2024,” said Sophia Angala (pictured bottom right) from ANZ, illustrating the persistent anxieties affecting consumer financial health.
Despite this, there are signs of resilience, with some stability in expectations for future financial conditions, suggesting a nuanced consumer outlook amid prevailing economic uncertainties.
Combining insights from all four reports paints a complex picture of an economy grappling with mixed signals.
While consumer confidence struggles with pessimism due to financial pressures and global instability, businesses are cautiously optimistic, finding some solace in marginal improvements in confidence and operational adjustments.
The divergent views on economic recovery, impacted by interest rate expectations and global economic shifts, will play a crucial role in shaping Australia’s economic trajectory through 2025.
