Australian consumer sentiment climbs but Donald Trump sours mood: Westpac

Australian consumer sentiment has reached its highest level since the Reserve Bank started its aggressive interest rate hike cycle. But the re-election of Donald Trump in the US has caused some uneasiness.

Consumers are seeing some further easing in the pressure on family finances, according to the latest Westpac-Melbourne Institute consumer sentiment index on Tuesday, and are no longer concerned about the risk of more rate rises.

Households are also becoming more confident about the economic outlook, it said.

But Westpac head of Australian macro-forecasting Matthew Hassan cautioned some big shifts over the course of the survey week suggested the lift in confidence was shakier than it looked.

“Sentiment posted a sharp fall following the US election (November 5) result but with a tentative recovery forming towards the end of the week,” Mr Hassan said.

Meanwhile, spending plans were also looking less austere than in prior years.

Responses to questions regarding Christmas spending intentions revealed that while 35 per cent of consumers still plan to spend less on gifts than last year, it was an improvement from the 40 per cent that planned to cut back this time in 2023.

The Westpac survey results came the same day National Australia Bank revealed business confidence was showing early signs of recovery, rising sharply in October to be back around average and at its highest since early last year.

Business conditions were unchanged in October.

“Confidence spiked in the month after an extended period of below average reads,” NAB head of Australian economics Gareth Spence said.

“While it’s just one month this is an encouraging sign alongside a tentative improvement in forward orders.”

AMP economist My Bui said both the Westpac and NAB surveys had been positive for Australia’s outlook, as consumers and businesses feel more upbeat going into the holiday season.

“However, we don’t expect the improved consumption picture to give inflation a major boost, because big spending purchase intentions remain negative, and the labour market has more downside risks at the moment,” she said.

Ms Bui said markets would be focused on wage growth data on Wednesday and the unemployment rate on Thursday to assess the RBA’s next move.

The central bank next meets on December 9-10.

Commonwealth Bank on Tuesday also revealed its latest household spending insights rose 0.8 per cent in October, only partly offsetting a 0.9 per cent decline in September.

“Spending rose marginally in October as income tax cuts, lower petrol prices and energy rebates freed some consumers up to spend on discretionary items,” CBA chief economist Stephen Halmarick said.

“Our view remains that a substantial increase in household spending is unlikely to occur until the RBA starts lowering interest rates, which we now expect in February 2025.”

Ten of the 12 spending categories CBA tracked rose in October, led by household goods; recreation; communications and digital; and hospitality.

Spending on ticketing services was also up 27 per cent, with concerts including Oasis and country artist Luke Combs, as well as the Melbourne F1, all going on sale in October.