Australian consumer sentiment edges higher but households remain pessimistic as inflation fears rise.
Summary:
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Australian consumer sentiment rose modestly in March, breaking a three-month run of declines.
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The Westpac–Melbourne Institute index increased 1.2% to 91.6, though pessimists still outnumber optimists.
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Sentiment deteriorated later in the survey period as the U.S.–Israeli war with Iran intensified.
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Inflation expectations surged to 6.1%, marking the largest weekly increase since the series began in 2010.
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The Reserve Bank of Australia recently lifted the cash rate to 3.85% and warned further tightening may be needed.
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A separate ANZ-Roy Morgan survey showed confidence dropping sharply last week as rising petrol prices weighed on households.
Australian consumer sentiment recorded a modest rebound in March after three consecutive months of decline, though households remain broadly pessimistic as geopolitical tensions and rising fuel prices cloud the outlook.
The Westpac–Melbourne Institute consumer sentiment index rose 1.2% to 91.6 in early March, up from 90.5 previously. Despite the improvement, the reading remains well below the neutral level of 100, indicating pessimists continue to significantly outnumber optimists.
The survey was conducted between March 2 and March 6, and responses indicated sentiment weakened as the week progressed and the conflict in the Middle East intensified. According to the survey analysis, responses gathered during the final three days of the period implied a much weaker sentiment reading near the mid-80s, highlighting how quickly geopolitical developments affected household confidence.
A notable feature of the report was a sharp jump in inflation expectations. The measure rose by 0.8 percentage points to 6.1%, representing the largest weekly increase since the series began in 2010. Rising fuel costs linked to the Middle East conflict likely contributed to the shift in expectations.
The data arrive shortly after the Reserve Bank of Australia lifted its cash rate by 25 basis points in February to 3.85%, the first increase in roughly two years. Policymakers signalled at the time that further tightening could still be required if inflation proves persistent.
Within the survey, views on household finances compared with a year earlier improved modestly after a sharp fall in February, while expectations for the longer-term economic outlook edged slightly lower.
A measure tracking whether consumers see it as a good time to buy major household items rose strongly, increasing nearly 5%. The gain recouped much of the drop recorded in February following the RBA’s rate increase.
However, other sentiment indicators paint a weaker picture. A separate weekly survey by ANZ and Roy Morgan showed consumer confidence falling sharply last week to 73.4, reflecting growing concern about personal finances and the economic outlook as higher petrol prices feed through to household budgets.
Overall, the data suggest Australian consumers remain cautious, with geopolitical tensions, elevated inflation expectations and rising fuel costs continuing to weigh on sentiment even as headline confidence shows signs of stabilising.