Consumer confidence in Australia has reached its highest level in three years, according to the latest ANZ-Roy Morgan Australian Consumer Confidence survey. The index rose by 3.9 points last week to 90.6 points, with the four-week moving average also increasing by 0.5 points to 87.5.
All subindices contributed to the increase in confidence. The measure of current financial conditions over the past year increased by 6.8 points, while expectations for future financial conditions over the next 12 months jumped by 7.9 points. Short-term economic confidence for the next year gained 1.1 points and medium-term economic confidence for the next five years rose by 1.5 points. The indicator tracking whether it is a good time to buy a major household item lifted by 2.2 points.
"For the first time since May 2022, ANZ-Roy Morgan Australian Consumer Confidence is above 90 points. The series rose 3.9 points last week to 90.6 points, supported by a lift across all the subindices," said ANZ Economist Sophia Angala.
Angala attributed much of this improvement to recent inflation data and monetary policy expectations: "Confidence in future household finances rose sharply after CPI data last week showed an easing in underlying inflation and raised the likelihood of an RBA rate cut in August. We expect the RBA to cut the cash rate by 25 basis points at its August meeting," she said.
Despite these positive signals, inflation expectations edged up slightly during the survey period, with weekly inflation expectations rising by 0.3 percentage point to reach 5.2 percent and the four-week moving average ticking up by 0.1 percentage point to hit 4.9 percent.
"Despite the data suggesting a sustainable return of inflation to the midpoint of the RBA’s 2–3 per cent target band, ‘Weekly inflation expectations’ rose last week. The US administration’s announcement of modified reciprocal tariffs over the weekend of the survey period may have driven the move up, but on a four-week moving average basis inflation expectations have largely moved sideways over the past year," Angala added.