Consumer sentiment index

IBISWorld forecasts consumer sentiment to grow by 5.9 points in 2025-26, to average 97.3 index points. Nonetheless, the index will be in negative territory, below the neutral level of 100. Although lower inflation is beginning to support daily spending decisions, the cumulative effect of previous price rises continues to erode real family spending power and undermine consumer confidence. The cash rate has decreased from its high to 2.89, a significant plunge from the pre-cut level. However, it still exceeds pre-tightening levels, making borrowing costs a burden for many people. According to Roy Morgan's commentary, despite robust income growth and previous interest rate falls, confidence remains low, with many consumers being wary about significant purchases and future financial obligations. In this climate, persisting cost-of-living pressures, increased interest rates, and economic uncertainty are projected to continue weighing on consumer sentiment and limiting discretionary expenditure.

Consumer sentiment has generally remained in the negative territory between 2021 and 2025, as households grappled with elevated living costs, higher interest rates, and ongoing economic uncertainty rather than purely pandemic-related factors. Although confidence recovered from the initial pandemic shock, rapid monetary tightening and global geopolitical tensions prevented a sustained return to consistently positive sentiment readings over this period.

From late 2021 onward, a sharp rise in consumer prices and successive interest rate hikes significantly eroded real disposable incomes and raised debt-servicing burdens, weighing heavily on households' views of their current finances and willingness to commit to major purchases. At the same time, uncertainty related to global conflicts, volatile energy prices and concerns about the broader economic outlook further undermined confidence, keeping the index below the neutral level of 100 through the majority of the time period of 2022 and 2023.

By late 2024 and into 2025, consumer sentiment showed signs of improvement from its 2022–23 lows, reflecting moderating inflation and the start of interest rate cuts that eased some pressure on mortgage-paying households. However, the index remained below historical norms and below the 100 neutral mark, indicating that many families were still cautious about discretionary spending and future financial obligations despite the partial recovery in confidence.

Overall, IBISWorld estimates that consumer sentiment will decline at an average annual rate of 1.5 index points over the five years through 2025-26, highlighting that persistent cost-of-living pressures and global uncertainty have left a lasting mark on consumer confidence. While conditions in 2025 are less depressed than at the trough in late 2022, sentiment is still subdued compared with pre-tightening years.