The latest ANZ-Roy Morgan Consumer Confidence Index jumped 2.5 points to 88.5 last week, marking the strongest level since May 2022, driven by improving economic outlook and falling inflation expectations.
Weekly inflation expectations have dropped significantly, falling 0.4 percentage points to 4.6 per cent, while the four-week moving average declined to 5.0 per cent, suggesting a potential shift in the economic landscape.
ANZ Senior Economist Sophia Angala said the improved outlook was widespread across key indicators.
“Households are feeling more confident about the economic outlook, with short-term economic confidence rising to its highest level since April 2022,” Ms Angala said.
The surge in confidence appears closely tied to discussions about potential RBA rate cuts, with short-term economic confidence climbing 1.8 points and medium-term economic sentiment rising by 3.9 points.
“The decline in weekly inflation expectations and the broad-based lift across the subindices may have been influenced by discussion that the RBA could cut rates at its February meeting,” Ms Angala said.
Consumer spending sentiment also showed signs of improvement, with the ‘time to buy a major household item’ subindex increasing by 1.5 points, indicating growing consumer willingness to make significant purchases.
Despite the positive momentum, overall confidence levels remain below the long-term average of 109.8 points, reflecting ongoing concerns about cost-of-living pressures and economic uncertainty.
Financial conditions have seen improvement over the past year, with current conditions rising 1.8 points, although future expectations showed a slight decline.
The confidence boost comes as the latest CPI data showed inflation falling within the central bank’s target range, strengthening expectations for potential rate cuts in the coming months.
“This comes after the quarterly CPI indicator showed that the RBA’s preferred measure of inflation, the trimmed mean, printed below RBA forecasts in Q4,” Ms Angala said.
