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

Australian consumer confidence has dropped to 92.9 at the start of 2026, according to the latest Westpac-Melbourne Institute survey, marking a 1.7% decline from the previous month. This drop indicates increasing pessimism among households, particularly concerning family finances and the broader economic outlook, as interest rate expectations rise sharply. Nearly two-thirds of consumers now anticipate an increase in mortgage rates over the next year, more than doubling the proportion from September. The deterioration was focused on short-term expectations, with sub-indexes tracking family finances and economic outlook falling by 4.5% and 6.5%, respectively. Job confidence has also softened, contributing to a cooling labor market sentiment. Despite these declines, there were modest improvements in other areas, with assessments of family finances compared to a year ago rising by 2.3%. Ahead of the upcoming Reserve Bank of Australia meeting, the survey results present a mixed backdrop, with softening consumer confidence and easing demand indicators suggesting a cautious approach may be warranted amidst rising borrowing costs. The upcoming CPI data will be crucial for the RBA's policy decisions.