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Australian consumer sentiment weakened sharply in early December, according to a private survey released on Tuesday, highlighting growing concerns about inflation and the broader economic outlook. The latest Westpac–Melbourne Institute Consumer Sentiment Index fell by 9% in early December, erasing nearly all gains recorded in the previous month and pushing sentiment back into negative territory.
The decline underscores how persistent inflation pressures are weighing on Australian households. Westpac noted that inflation remains the dominant concern for consumers, particularly after consumer price index data came in stronger than expected for around four consecutive months. These results have revived anxiety over the future path of interest rates and the cost of living, dampening confidence across the economy.
Concerns over interest rates intensified after the Reserve Bank of Australia signaled last week that it had likely concluded its rate-cutting cycle. While the move was intended to reflect progress in stabilizing economic conditions, many consumers interpreted it as a sign that borrowing costs could remain elevated for longer. According to Westpac analysts, stronger inflation outcomes have reignited fears about the trajectory of interest rates, feeding into broader worries about economic growth and household finances.
The survey found that Australians remain “cautiously pessimistic,” with outright optimism proving difficult to achieve. Despite a relatively tight labor market, consumers showed little enthusiasm, suggesting that job security alone is not enough to offset rising living expenses and financial uncertainty. Sentiment around major financial decisions, including homebuying and investing, also remained subdued, reflecting continued caution among households.
Looking ahead, Westpac expects inflation to gradually move back toward the RBA’s target range next year, which could help ease pressure on household budgets and improve consumer confidence. However, the bank warned that any delay in disinflation could result in interest rates staying higher for longer, further denting consumer sentiment and slowing economic momentum. For now, Australian consumers appear wary, closely watching inflation and monetary policy signals as they navigate an uncertain economic landscape.
