Key Takeaways

• Modest rebound: The Westpac-Melbourne Institute Consumer Sentiment Index climbed 3.5% in May to 83.0 from 80.1 in April.
• Recovering from sharp drop: May’s gain follows the previous month’s brutal 12.5% fall.
• Fuel relief helps: Australia’s temporary fuel excise cut helped lower petrol prices after the Hormuz-driven surge.
• Still deeply pessimistic: Sentiment remains well below the long-run average of 100.3.

Australian consumer sentiment rose modestly in May as easing fuel prices provided some relief to households, although confidence remained deeply pessimistic amid rising borrowing costs and concerns over the economic outlook.

The Westpac-Melbourne Institute Consumer Sentiment Index climbed 3.5% in May to 83.0 from 80.1 in April, recovering from the previous month’s sharp 12.5% fall.

The improvement came as Australia’s temporary fuel excise cut helped lower petrol prices after the recent surge linked to tensions around the Strait of Hormuz.

Still, sentiment remained well below the long-run average of 100.3 as households grappled with higher interest rates and persistent inflation pressures.

Mortgage Worries Reach Three-Year High

The Reserve Bank of Australia earlier this month delivered its third consecutive rate hike. Westpac’s Mortgage Rate Expectations Index rose 2.3% to a three-year high of 181.2, with 85% of consumers expecting mortgage rates to rise further over the next year.

Housing-related sentiment deteriorated significantly. The “time to buy a dwelling” index slumped 16.1% to an 18-month low of 72, reflecting affordability pressures and rising mortgage costs.

Westpac said consumers remained cautious despite some easing in fuel-price shocks, warning that elevated inflation and energy supply uncertainty continued to weigh on confidence.