The Westpac–Melbourne Institute Consumer Sentiment Index rose slightly in July, up 0.6% to 93.1 from 92.6 in June. But the headline result hides mixed reactions, particularly after the Reserve Bank’s surprise decision to leave the cash rate unchanged.
In a widely unexpected move, RBA kept the official cash rate at 3.85% in July, citing global uncertainty as the primary reason for holding steady.
“While the mood improved a touch for the month as a whole, responses over the survey week show a clear disappointment following the RBA’s surprise move,” said Matthew Hassan (pictured), Westpac’s head of Australian macro-forecasting.
Consumers surveyed before the RBA announcement reported an index reading of 95.6, while those surveyed after the decision posted a lower 92 reading.
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Three of the five consumer sentiment sub-indexes improved in July, particularly around household finances.
The “family finances vs a year ago” sub-index rose 5% overall, and more than 12% among respondents surveyed before the rate announcement.
The “family finances, next 12 months” sub-index also ticked up 2.6% to 101.4, returning to net positive territory.
Despite the July pause, many consumers still expect interest rates to fall.
The Mortgage Rate Expectations Index fell 1.7% to 83.1—a 13-year low—suggesting more consumers now expect rates to decline over the coming year.
Among those surveyed after the RBA decision, just over half of those with a view expect mortgage rates to be lower a year from now, and this figure rises to 60% among those with a mortgage.
Economists are also increasingly confident that cuts are coming. A Reuters poll conducted July 8–9 found all 30 surveyed economists expect the RBA to cut the cash rate by 25 basis points to 3.60% on August 12, with another cut likely later in 2025.
The poll also showed that 25 of 27 economists expect the cash rate to fall to at least 3.35% by the end of 2025, with most forecasting a trough of 3.10% in early 2026.
Read the Westpac-MI Consumer Sentiment Bulletin for more information.
