The mood among Australian consumers darkened further in June, with the Westpac–Melbourne Institute Consumer Sentiment Index declining 2.9% to 80.6 — reversing a modest improvement in May and pushing the reading back among the weakest in the survey's fifty-year history. Pessimists now outnumber optimists by nearly 20%, and the data points to a household sector under significant financial stress.
The report, authored by Westpac head of Australian macro-forecasting Matthew Hassan (pictured), attributes the deterioration primarily to cost-of-living pressures that briefly eased before returning with force. A temporary halving of the fuel excise tax provided only limited and short-lived relief, while concerns about family finances tightened sharply across the board.
Historically, Australians tend to be modestly optimistic about their near-term financial prospects, with a long-run average of 106.5 on the forward-looking family finances sub-index. June's reading tells a very different story.
Both finance sub-indexes fell steeply — assessments of current finances relative to a year ago dropped 7.5% to 67.3, while expectations for the year ahead fell 8.5% to 85.1 — giving back nearly all of May's gains to sit close to April lows. Sub-85 reads on the forward measure have occurred barely a handful of times in fifty years.
Despite a slight easing in rate rise expectations — the mortgage rate expectations index dipped 4.8% to 172.6 — more than two thirds of consumers still anticipate variable mortgage rates will climb further over the next 12 months.
"Australian consumers are clearly bracing for more bad news on the financial front," Hassan said.
That sentiment is borne out in the latest Roy Morgan mortgage stress data: the RBA's February and March rate hikes pushed mortgage stress to 28.2% of all mortgage holders, with Roy Morgan CEO Michele Levine warning the May hike was set to push that figure to 29.8% — equivalent to 1,552,000 mortgage holders "at risk."
Beyond household finances, housing-related data produced a mixed picture.
Buyer sentiment recovered partially from a very weak May, with the 'time to buy a dwelling' index rising 12.6% to 81.1 — though that remains sharply below the long-run average of 119.
More significantly, house price expectations recorded a sharp reversal, with the house price expectations index dropping 14.9% to 128.2, falling below its long-run average of 130 for the first time in nearly three years.
The sharpest pullbacks were recorded in New South Wales and Victoria, where capital city markets — Sydney and Melbourne — are already recording significant price corrections.
Hassan's report points to recently announced federal budget tax changes affecting investor housing as a likely driver of the shift, with some consumers "becoming more unsettled about the impact of recently announced tax changes."
Independent analysis supports the concern — a Moody's Ratings report warned that "further interest rate rises together with high housing prices are set to worsen affordability for new homebuyers over the rest of 2026," with the national affordability measure already at 29.6% of average after-tax household income as of March, up from 28.6% in December 2025.
Risk aversion is rising more broadly. The share of consumers nominating real estate as the wisest place for savings fell to just 4.5% in June — the lowest reading since the survey began in 1974, and well below the historical average of 24%.
With the Reserve Bank board meeting this week on 15–16 June, Westpac expects a pause in rate rises as the board assesses the impact of energy price pressures and recent monetary tightening.
However, with underlying inflation still running above the RBA's 2–3% target, Hassan signals the pause is unlikely to mark the end of the tightening cycle, noting the bank "still expects further rate hikes in subsequent meetings."
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