Consumers Expect Inflation Pressures To Ease In 2024

Westpac consumer confidence rose 2.9% to 82 in October, the highest since April when the RBA paused its tightening cycle for the first time. Sentiment remains depressed but appears to have found a floor. The strong labour market continues to support household finances and thus confidence but rate fears have re-emerged and cost-of-living worries continue.

• Westpac notes that the October level of confidence is still consistent with consumption per capita declining.
• Unemployment expectations fell 2.7% and have returned to below the series average. The series has been moving sideways over recent months consistent with a stable unemployment rate and implying that people don’t expect layoffs.
• Following the October RBA pause, 63% of those surveyed expected another hike up from 48% in September. Only 7% expect a rate cut in the next 12 months down from 15%.
• While “family finances” improved, it continued to show that inflation is pressuring households. The rise in “finances vs a year ago” may have been due to recent rises in award wages, higher deposit rates and indexation of welfare payments, according to Westpac. The outlook for finances is up almost 12% since June mainly driven by an expected improvement in price pressures.
• “Time to buy a major household item” rose by 7.6% which is positive for the consumption outlook but this survey component remains depressed.
• House prices are expected to continue rising but that is weighing on the “time to buy a dwelling” index which even though it rose in October remains very low.