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Australian consumer confidence hits 20-month high

The national mood has changed, with consumers looking towards major purchases, cooling inflation, and the possibility of interest rate cuts.

This is according to the Westpac-Melbourne Institute Consumer Sentiment index, which rose 6.2 per cent for the month of February, resulting in a 20-month peak.

While this is welcome news, given that levels were recently at lows last seen during the recession, consumer sentiment still sits at 86 — 100 is considered ‘neutral’, so there is still a way to go until Australians are feeling positive about the economy.

The promise of stage 3 tax cuts were seen as positive, but the Reserve Bank’s muted response after its meeting last week means the overall consumer mood “remains pessimistic”.

Consumers are no longer expecting a mortgage rate rise in the 12 months, with the proportion of those predicting a leap declining to 42.4% from levels of 61.3% in December.

“This suggests that while consumers increasingly anticipate that the current tightening cycle is likely close to its peak, the majority still expect a non-negligible probability of a further rate hike in the next 12 months,” says Westpac senior economist, Matthew Hassan.

“Meanwhile, the proportion of consumers expecting the mortgage rates to fall in the next 12 months rose to 23.7 per cent from 12.1 per cent in January, indicating that a sizable portion of consumers is expecting the start of an easing cycle around the end of 2024 and early 2025.”

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