Consumer confidence edges higher, but households remain cautious

Australian consumer confidence has lifted modestly, with households reporting a slight improvement in how they feel about their finances and the broader economy.

The latest ANZ-Roy Morgan Australian Consumer Confidence series showed the headline index rose 2.3 points last week to 66.4, with all subindices also posting gains.

ANZ Economist Sophia Angala said the gains point to a broad-based, if still tentative, improvement. 

“We have seen an increase across our headline consumer confidence series and the subindices, indicating households are reporting increased confidence in their financial and economic conditions,” she said.

More Australians are also feeling better about making big purchases. “More households are reporting some confidence that it is time to buy a major household item,” Angala noted.

However, this increase needs to be viewed in context. Confidence remains extremely weak by historical standards.

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Despite the “improvements in confidence last week, the series is still sitting at around record lows,” Angala said. 

“Households are feeling less confident than they have over the past fifty years, with our ANZ-Roy Morgan Consumer Confidence series hovering around its lowest levels since it started in 1973.”

Many households continue to feel financial pressure, with inflation a key concern.

“We have seen a pickup in inflation… and the impacts of higher petrol prices have driven headline inflation to around 4 per cent year on year in the first quarter,” Angala said.

She added that households’ inflation expectations “are still hovering at around record highs for the series since it started in 2010.” 

Looking ahead, attention is turning to the Reserve Bank of Australia, which meets again in mid-June. Interest rates have been a major driver of the prolonged weakness in confidence.

“What you normally see in a rate hiking cycle is that confidence does dip, and we have seen that since the beginning of this hiking cycle,” Angala said.

ANZ expects the RBA to remain on hold for now. “We foresee that the RBA is going to be on an extended hold… with the cash rate at that peak of 4.35 per cent,” she said.

For households, this suggests some stability may be in sight, although confidence is likely to remain fragile.