Australian consumer sentiment index drops by 0.7% in January

January 14, 2025 (MLN): Australian consumer sentiment dipped for a second month in January as financial stress dominated at the start of the new year, a survey showed on Tuesday, suggesting spending will remain subdued in the near term.

The Westpac-Melbourne Institute index of consumer sentiment fell 0.7% in January from December, when it dropped 2%, according to Reuters.

The index was still up 13.8% on a year ago, but at 92.1 showed pessimists again outnumbered optimists.

The cautious outlook should reassure the Reserve Bank of Australia that consumers are not about to rush out spending and stoke inflation, leaving the door open for some easing in monetary policy in coming months.

The breakdown of the survey showed the biggest stumbling block was the assessment of family finances compared to a year ago, which sank 7.8% to 77.7 in December as high mortgage rates outweighed the impact of tax cuts in 2024.

The outlook, at least, was brighter with the index of family finances for the next 12 months rising 1.1% to 104.4, showing optimists were in the majority.

"The consumer mood has soured for two months in a row and remains on the pessimistic side," said Westpac chief economist Luci Ellis.

"However, sentiment is still less negative than a year ago and some components suggest that consumers expect things to continue to improve from here."

The survey's measure of the economic outlook for the next 12 months was flat in December, while the outlook for the next five years edged up by 0.7%.

The measure of whether it was a good time to buy a major household item rose 1.8%, though it remains historically weak at 90.8.

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