ANZ-Roy Morgan Consumer Confidence was up 2.2pts to 79.8 this week as inflation expectations continue on a downward trajectory.
ANZ economist Madeline Dunk said consumer confidence is now at its highest level since late April.
“While the series remains at very low levels, particularly for those paying off a mortgage, there are some early signs of tempered optimism amongst households,” Dunk said. “Confidence for mortgage holders rose 4.1pts to record its highest reading in more than seven months.
“Meanwhile confidence increased 4.7pts for renters, after a sharp fall the week beforehand, but declined 2.3pts among those who own their home outright.”
Alongside the lift in confidence, Dunk said inflation expectations fell to 4.9% in mid-September, calling it the lowest reading since February 2022 before Russia invaded Ukraine.
The drop to 4.9% in mid-September is down from 5.4% recorded in August 2023, and down from 5.6% recorded in July.
Expected inflation scores cover annually over the next two years.
Consumer Confidence is now 6.2pts below the same week a year ago and is 1.6 pts above the 2023 weekly average of 78.2.
ANZ and Roy Morgan claimed a lift in confidence about personal financial situations over the next year drove the increase this week.
Now a fifth of Australians (20% - down 1ppt) say their families are ‘better off’ financially than this time last year compared to 52% (down 3ppts) that say their families are ‘worse off’ financially.
Looking forward, 33% (up 3ppts) expect their family to be ‘better off’ financially this time next year while 33% (unchanged) expect to be ‘worse off’.
8% (up 1ppt) of Australians expect ‘good times’ for the Australian economy over the next twelve months compared to 34% (down 2ppts) that expect ‘bad times’.
There was also a 4 percentage point drop in Australians expecting ‘bad times’ for the economy over the next five years to 19% compared to now 10% (down 1ppt) of Australians expecting ‘good times’.
This comes as the RBA held interest rates in early September at 4.1% for the third straight month.
Roy Morgan noted the softening in inflation expectations in recent weeks suggest the RBA’s decision to leave interest rates unchanged during their last three meetings may be the correct decision, but added there are still significant pressures in the economy.
This includes the average petrol price in Australia increasing to $2.04 per litre.
Roy Morgan CEO Michele Levine said the RBA has taken stock of the evolving economic situation in Australia, leading to the drop in inflation expectations.
“Although the drop in Inflation Expectations during August and September is good news, there are signs that it may prove to be short-lived,” Levine said. “So far in September the Australian Dollar has hovered consistently below 65 US cents – including hitting a low of only 63.6 US cents.
“The immediate impact of the low Australian Dollar is being felt at the pump with average retail petrol prices averaging $2.04 per litre last week and above $2 per litre for the last five weeks.
“This is the first time since July 2022 petrol prices have been at a sustained high level above $2 per litre for more than a month.”
Levine said petrol prices are one of the most visible signs of inflation.
“If they continue to remain at an elevated level above $2 per litre, or even rise further in the weeks and months ahead, this will clearly increase the general inflationary pressures in the economy.”
Levine said that if these inflationary pressures in the economy continue to grow, there will be renewed pressure on the RBA to increase interest rates again.
“The next RBA meeting on interest rates will be new Governor Michele Bullock’s first in the top job,” Levine said.
“Although all the current signs are that the RBA is set to leave interest rates unchanged, as ANZ economists Adam Boyton and Blair Chapman noted in a research note today: the RBA opted for a ‘hawkish pause’ in September as they continued to ‘monitor incoming data and how these alter the economic outlook and assessment of risks.’”