The latest Westpac–Melbourne Institute Consumer Sentiment Index recorded a modest rise of 2.2% to 92.1 in May, showing early signs of stabilisation following recent market shocks.
The lift comes after a steep fall in April and reflects improving sentiment around household finances, petrol prices, and the economy.
The rise aligns with broader signs of easing inflation and expectations of a further interest rate cut by the Reserve Bank, as consumer caution persists amid weak spending momentum and subdued long-term outlooks.
Four of the five components of the index improved in May, with the biggest gain in the “family finances vs a year ago” sub-index, which jumped 7% to 75.1.
“The move mirrors the rebound in global share markets – the S&P/ASX200 up 7.4% between the April and May surveys,” said Matthew Hassan (pictured), Westpac’s head of Australian macro-forecasting.
Older Australians and renters reported the largest rebounds, with assessments rising 23% among over-65s and 8.2% for renters. A 13¢ fall in average petrol prices was also seen as a contributing factor.
However, not all indicators improved. The “family finances, next 12 months” sub-index declined slightly by 0.8% to 100.7, suggesting lingering caution.
The “economic outlook, next 12 months” sub-index rose 2.8% to 93, regaining nearly half of April’s drop. Meanwhile, unemployment expectations improved, with the index falling 2.1% to 121.3—a sign that more consumers believe job conditions will improve, the Westpac-MI index showed.
“Consumers gained a little more confidence around jobs,” Hassan said, adding that the unemployment expectations index remains below its long-term average.
The long-term economic outlook saw little change, with the “economic outlook, next five years” index inching up 0.2% to 98.6.
Spending intentions showed cautious optimism. The “time to buy a major household item” sub-index rose 3.5% to 93.2, continuing a broader trend of recovery, though still well below neutral.
“That said, the recovery has lost its way a little in early 2025 with buyer sentiment retracing 4% over the last two months and recent updates showing retail sales and broader indicators of spending stalling flat in the March quarter,” Hassan said.
On housing, the “time to buy a dwelling” index climbed 5.1% to 90, reflecting slightly improved affordability perceptions. However, pessimism still outweighs optimism.
Consumers remain confident about property values. The Index of House Price Expectations increased 1.4% to 155.5, with 87% of respondents expecting prices to stay the same or increase over the next year.
“Consumers in NSW and South Australia remain a little more bullish,” Hassan said, noting that expectations were highest in NSW (159.6) and SA (158), and slightly lower in Victoria (153.3) and Queensland (152.9).
Looking ahead, all eyes are on the Reserve Bank’s May 19–20 meeting, where Westpac forecasts another 25-basis-point cut to 3.85%.
The expected rate cut, which Equifax links to a surge in mortgage enquiries, follows confirmation that inflation is now within the RBA’s 2–3% target band and comes amid continued weak consumer sentiment and sluggish household spending.
“Current policy settings are still weighing on the consumer,” Hassan said. “Some further easing in these restrictive settings is appropriate, particularly given the more unsettled and threatening global backdrop.”
