Australia's consumer sentiment dips in July amid inflation concerns

Australia’s consumer sentiment index dropped by 1.1 per cent to 82.7 in July from 83.6 in June, according to the latest Westpac–Melbourne Institute. The dip reflects growing concerns over persistent inflation and potential further interest rate hikes, overshadowing the expected boost from the ‘stage 3’ tax cuts and other fiscal support measures that took effect from July 1. Many consumers have yet to experience any cash flow benefits from these measures due to payment cycles for incomes and expenses being fortnightly or monthly.

The latest sentiment dip is largely centred around family finances. The ‘family finances vs a year ago’ sub-index saw the sharpest decline, dropping 8.4 per cent and nearly erasing last month’s promising 9.7 per cent lift. At 63.5, this sub-index remains at extremely weak levels. Additionally, consumer expectations for their finances worsened, with the ‘family finances, next 12 months’ sub-index falling 4.5 per cent to 92.1, the weakest reading since the end of last year. Combined, the two sub-indexes tracking finances have hit their lowest level since November.

In contrast, other components showed slight improvements. Consumers are somewhat less pessimistic about the economic outlook and their attitudes towards spending. The ‘economic outlook, next 12 months’ sub-index rose 3.6 per cent to 81.4, while the ‘economic outlook, next 5 years’ sub-index edged up 0.5 per cent to 94.5. The ‘time to buy a major item’ sub-index increased by 3.1 per cent to 82.1 but remains well below its long-run average of 124, as per the Westpac–Melbourne Institute.

Job security concerns remain relatively low among consumers. The unemployment expectations index improved marginally, declining 3.3 per cent to 128.6 in July. Lower readings on this index indicate fewer consumers expect unemployment to rise over the coming year. Overall, sentiment around jobs is close to long-run average levels, indicating subdued but stable labour market conditions rather than a sharp decline.

The ‘time to buy a dwelling’ index saw a 4 per cent increase to 75.7, reversing most of the decline observed in June. However, the index continues to hover around extreme cycle lows. By state, buyer sentiment is slightly less pessimistic in New South Wales, averaging 78.6 over the past three months, but remains much weaker in Western Australia and South Australia, with averages of 67.2 and 62.7, respectively.

Fibre2Fashion News Desk (DP)