By Jacob Shteyman in Canberra
Australian households are optimistic about their economic prospects for the first time since the start of an inflation spike almost four years ago.
The Westpac-Melbourne Institute Consumer Sentiment Index climbed above 100, meaning optimists outnumbered pessimists, marking a watershed moment for Australia’s economy since sentiment soured in early 2022.
It was an extraordinary and somewhat surprising result, Westpac head of Australian macro-forecasting Matthew Hassan said.
“Sentiment overall is still only marginally positive rather than strongly optimistic,” he said on Tuesday.
“However, the move draws a clearer line under what had been an extended period of consumer pessimism when disposable incomes were being hit hard by a combination of high inflation, high interest rates and rising tax payments.”
The index surged 12.8 per cent to 103.8 in November despite renewed concerns about inflation and the prospect the Reserve Bank might have ended its easing cycle after just three rate cuts.
“Domestically, there are clearer signs that a recovery is gaining momentum, especially around consumer demand and housing markets,” Mr Hassan said.
The surge in sentiment bodes well for retailers ahead of the crucial Black Friday and Christmas sales periods after a run of leaner years.
While intentions to spend more on gifts fall short of the highs seen during the post-COVID reopening boom in 2021, it was the least restrained outlook recorded outside of that year in nearly a decade, Mr Hassan said.
Consumers have been steadily loosening their purse strings throughout 2025, with household spending up 5.1 per cent through the year to September, according to Australian Bureau of Statistics figures.
Business conditions lifted by two index points in NAB’s monthly business survey, also released on Tuesday, driven by improved trading conditions and profitability in the retail and wholesale sectors.
“This is encouraging as it looks like not only has the economy maintained the improved momentum in the private sector gained in (the first half of 2025), but also that private-sector activity has strengthened a little further,” NAB chief economist Sally Auld said.
But with businesses already running near maximum capacity and consumer activity gaining strength, firms might feel more empowered to pass rising costs onto consumers, further fuelling inflation.
Westfield owner Scentre Group on Tuesday reported sales growth across its 42 locations accelerated to 3.7 per cent in the three months ending September 30.
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