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Australian consumer confidence weakened further in January, slipping deeper into pessimistic territory as households became increasingly uneasy about interest rates, employment prospects, and the short-term economic outlook. According to the latest Westpac-Melbourne Institute Consumer Sentiment survey released on Tuesday, sentiment continues to be shaped by growing uncertainty about the year ahead.
The Consumer Sentiment Index declined by 1.7% to 92.9 in January, down from 94.5 in December. This marks another month below the neutral 100 level, which separates optimism from pessimism, signaling that Australian households remain cautious about the economy. The drop was primarily driven by worsening expectations for the next 12 months rather than current conditions.
Key components of the survey showed notable deterioration. Expectations around family finances over the coming year fell by 4.5%, while views on economic conditions in the year ahead dropped sharply by 6.5%. Westpac noted that these declines reflect rising concerns about economic stability heading into 2026, with consumers increasingly uncertain about their financial security.
Interest rate expectations emerged as a major factor weighing on confidence. Westpac highlighted a significant shift in consumer views, with nearly two-thirds of respondents now expecting mortgage rates to rise over the next 12 months. This is more than double the proportion recorded in September, underscoring how rapidly sentiment has changed as inflation and borrowing costs remain in focus.
Employment confidence also weakened during the month. A growing share of households now expect unemployment to increase, aligning with signs of a softening labour market. This combination of higher interest rate expectations and job insecurity has contributed to a more cautious consumer mindset.
Despite the decline, Westpac emphasized that overall confidence levels remain well above the lows experienced during the 2022–2024 cost-of-living crisis. Looking ahead, the Reserve Bank of Australia is widely expected to keep interest rates unchanged at its February meeting and throughout the rest of 2026, which may help prevent a sharper downturn in consumer sentiment.
