Australian consumer confidence slips, 92.9 (94.5 prior), as rate expectations turn higher

Summary:

• Consumer sentiment slips further into pessimistic territory

• Rate expectations jump, weighing on confidence

• Near-term economic outlook deteriorates most sharply

• Job confidence softens, housing sentiment steadier

• Mixed backdrop for upcoming RBA decision

Australian consumer confidence slipped further into pessimistic territory at the start of 2026, with the latest Westpac–Melbourne Institute survey showing households growing more cautious about the year ahead as interest-rate expectations shift higher.

The headline Consumer Sentiment Index fell 1.7% to 92.9 in January, following a sharp 9% decline in December. While confidence remains well above the extreme lows seen during the 2022–2024 cost-of-living crisis, the reading below 100 indicates pessimists continue to outnumber optimists.

Westpac economist Matthew Hassan said households are becoming increasingly concerned about what 2026 may bring for family finances and the broader economy. A key driver remains a sharp turnaround in interest-rate expectations, with nearly two-thirds of consumers now expecting mortgage rates to rise over the next year, more than double the proportion recorded in September.

The deterioration in January was concentrated in near-term expectations. Sub-indexes tracking family finances over the next year and the economic outlook over the coming 12 months fell 4.5% and 6.5% respectively. Consumers also became less confident about job prospects, reinforcing signs that labour-market optimism is cooling after a period of resilience.

These declines were partially offset by modest improvements elsewhere. Assessments of family finances compared with a year ago rose 2.3%, while longer-term economic expectations and views on whether now is a good time to buy major household items edged higher. Housing-related sentiment was comparatively resilient, with younger consumers remaining positive on buying conditions despite a slight cooling in house price expectations.

For policymakers, the survey presents a mixed backdrop ahead of the Reserve Bank of Australia’s next meeting, February 2 and 3. Softer consumer confidence and easing demand indicators support the case for patience, even as households increasingly brace for higher borrowing costs. With CPI data set to be a key focus in coming weeks, the RBA is likely to weigh signs of moderating demand against still-elevated inflation risks before adjusting its policy stance.

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RBA dates this year:

This article was written by Eamonn Sheridan at investinglive.com.