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Australian consumer sentiment strengthened sharply in August, driven by improving household finances and greater confidence about the outlook for interest rates, according to the latest Westpac-Melbourne Institute survey.
The Westpac-Melbourne Institute Consumer Sentiment Index climbed 6% to 88.9 in August from 83.9 in July. Despite the strong monthly increase, the index remained below its long-term average of 100.2 and was still 9.7% lower than a year earlier.
The improvement was particularly noticeable among mortgage holders following the Reserve Bank of Australia’s August 11 decision to leave interest rates unchanged. Westpac said responses collected before the RBA meeting showed little movement from July, while sentiment improved significantly afterward. Confidence among renters, however, edged lower.
Interest rate concerns have not disappeared. Around 59% of consumers expect mortgage rates to rise over the next 12 months, broadly unchanged from July. Following the RBA decision, however, nearly 28% expected rates to remain steady or decline, compared with 21% before the meeting.
Australian households also reported a stronger financial position. The index tracking family finances compared with a year earlier surged 12.6% to 80, the largest monthly gain among the survey’s components. Expectations for household finances over the coming year increased 1.8% to 98.2.
Confidence in the Australian economy improved as well. Expectations for economic conditions over the next 12 months rose 5.8% to 82.8, while the five-year outlook advanced 3.2% to 89.8. Both measures remained below historical averages.
The labour market was a weaker point. Australia’s unemployment expectations index increased 4.4% to 135.7, indicating more consumers anticipate unemployment will rise.
Housing market sentiment delivered mixed signals. The time-to-buy-a-dwelling index jumped 12.1% to 95.7, reaching its highest level since November 2025. In contrast, house price expectations dropped 6.1% to a three-year low of 110.8.
The Westpac-Melbourne Institute survey covered 1,200 Australian adults between August 10 and August 14.
