Consumers More Confident, Unemployment Expectations Rise Again

The Westpac measure of consumer confidence for December rose 3% m/m, despite surveying during an RBA meeting week, but didn’t fully unwind the 6.9% drop in November. The index remains depressed and is down 23% y/y but may have stabilised as rate hike expectations eased further.

• Inflation remained a key concern for households with 58% of households recalling news related to inflation compared to 23% for interest rates. Those surveyed perceived the news on inflation and the state of the economy as the most negative.
• 50% of respondents expect rates to rise at least a further 100bp over 2023 but that has moderated from 60% in the last survey and a peak of 73% in July. Westpac notes that this may have driven the unexpected increase in the outlook for house prices which soared 27.6% and was broad based across states.
• Unemployment expectations rose a further 0.5% m/m after +17% over Oct/Nov to the highest since April 2021 (see chart).
• The forward looking components drove the index higher this month with expectations +4%, family finances a year ahead +6.9% and the economy in 5 years +5.2% but again these increases were still smaller than the declines in November.
• Family finances compared to a year ago fell for the second consecutive month. With the full extent of monetary tightening yet to be felt and increase in the cost of living, this component is likely to remain depressed or even deteriorate further early in 2023. Any relief from the government’s energy plan is not likely to be felt until at least mid-2023.
• See press release here.

Source: MNI - Market News/Refinitiv/ABS/Westpac