Consumer confidence has fallen again in June, with households reporting increased pressure on their finances and growing concern about the year ahead.

 

The Westpac–Melbourne Institute Consumer Sentiment Index dropped 2.9 per cent to 80.6 in June, down from 83 in May, leaving the measure among the weakest readings in its nearly 50-year history. 

 

Westpac Head of Australian Macro-Forecasting Matthew Hassan says the result reflects “deep pessimism,” with pessimists outnumbering optimists by a significant margin. 

 

Cost-of-living pressures remain front of mind

“Cost-of-living issues came back with a vengeance in June,” Hassan says, pointing to sharp declines in how consumers assess both their current finances and their outlook for the next 12 months.

 

The sub-index tracking family finances compared to a year ago fell 7.5 per cent, while expectations for finances over the next year dropped 8.5 per cent, reversing much of the improvement seen in May. 

 

While temporary relief measures, such as the halving of the fuel excise, had previously provided some support, the latest results suggest that impact has been short-lived. 

 

Households bracing for more pressure

The forward-looking components of the survey highlight a cautious outlook among consumers.

 

Hassan notes readings on expectations for family finances are now well below long-run averages, indicating households are “clearly bracing for more bad news on the financial front.” 

 

Historically, Australians tend to be moderately optimistic about their financial prospects. The current readings, however, sit among some of the weakest seen over decades. 

 

Mixed signals on the broader economy

While views on personal finances deteriorated, sentiment around the broader economy was more mixed.

 

Near-term concerns about the economy eased slightly, but expectations over the medium term fell to a three-year low. 

 

At the same time, unemployment expectations remained at “moderately elevated levels,” suggesting ongoing concern about job security, even if conditions have not worsened materially in recent months. 

 

What’s shifting behaviour

The survey also points to changing attitudes towards housing and spending.

 

Sentiment around buying a home is “less bleak,” but expectations for house prices have dropped sharply. Hassan’s view is it may reflect growing uncertainty following recently announced tax changes.

 

Meanwhile, attitudes towards major household purchases showed mixed results, indicating that while some consumers may still be spending, caution remains a key theme. 

 

How the index works

The Consumer Sentiment Index is based on five components, capturing how households feel about their finances now and in the future, as well as their views on the broader economy - and whether it’s a good time to make major purchases. 

 

Together, these measures provide a snapshot of how Australians are navigating economic conditions. For now, the picture remains subdued.

 

A version of this article was first published on Westpac IQ.