Consumer sentiment rises 6% on RBA hold decision

The Westpac–Melbourne Institute Consumer Sentiment Index rose to 88.9 in August from 83.9 in July, a monthly gain of 6%.

Despite the improvement, the index remains in pessimistic territory — below the long-run average of 100.2 and down 9.7% from August 2025.

The monthly gain was concentrated among borrowers following the Reserve Bank of Australia's decision on 11 August to hold the cash rate. Responses recorded before that decision were largely unchanged from July, with the full month-on-month improvement emerging in the post-decision period. Renter sentiment edged higher after the RBA meeting but had tracked below July levels beforehand, leaving that cohort modestly lower for the month overall.

"This is still a weak result and noticeably lower than the readings recorded last year," said Luci Ellis, chief economist at Westpac Group. "While consumers are feeling less pessimistic than last month, pessimists still outnumber optimists, especially about their current finances."

The 'family finances vs a year ago' sub-index recorded the largest percentage gain of any component, rising 12.6% to 80, despite fuel prices increasing in the days prior as the temporary excise cut was reversed. The 'family finances, next 12 months' sub-index lifted a more modest 1.8% to 98.2.

Forward-looking economic indicators also improved, though remained well below their long-run averages. The 'economic conditions, next 12 months' sub-index rose 5.8% to 82.8, while the 'economic conditions, next 5 years' sub-index added 3.2% to reach 89.8.

The 'time to buy a major household item' sub-index gained 8.1% to 93.8, though it remains approximately 35 points below its long-run average of 123.1.

Housing sentiment

The 'time to buy a dwelling' index rose 12.1% to 95.7, its highest reading since November 2025, with gains recorded across states and cities. Sydney and Melbourne both edged back above the 100 mark. The index remains lower in non-metropolitan areas, where housing price corrections have been less pronounced than in capital cities.

The Westpac–Melbourne Institute House Price Expectations Index fell 6.1% to a fresh three-year low of 110.8.

Outright owners were considerably more likely to anticipate price falls (43.5%) than those with a mortgage (27.2%) or renters (21.1%). The bulletin noted that renters' more downbeat views on home purchase timing are likely connected to these softer price expectations.

Unemployment expectations and interest rate outlook

The Unemployment Expectations Index increased 4.4% to 135.7, partly reversing July's decline and moving marginally above the long-run average of 129.3. A higher reading on this index indicates that more consumers expect unemployment to rise over the coming year. The increase was driven by female respondents and was broadly distributed across age groups and occupation categories.

The Interest Rate Expectations Index eased 2.3% to 158.8, though it remains substantially elevated — up 89.9% on a year earlier. A majority of respondents (59%) still expect mortgage rates to rise further. However, the share anticipating rates to hold or fall increased to nearly 28% following the RBA decision, from 21% before it.

The RBA Monetary Policy Board is next scheduled to meet on 28–29 September. The August meeting statement indicated the board's readiness to raise rates again if upside inflation risks emerge. The bulletin noted, however, that only one monthly inflation print will be available ahead of that meeting, and that the labour market has been easing more rapidly than the RBA had previously forecast. On that basis, the bulletin assessed it as unlikely the board will have sufficient evidence to act at the September meeting.

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