Australian Consumer Sentiment Weakens Further in January on Interest Rate Concerns

Australian consumer confidence slipped further into pessimistic territory in January, as households grew increasingly worried about interest rates, employment prospects, and the near-term economic outlook.

The consumer sentiment index declined by 1.7% to 92.9 in January, down from 94.5 in December, remaining below the 100 threshold that separates optimism from pessimism.

The decline was driven largely by a deterioration in expectations for the year ahead. Indicators tracking views on household finances over the next 12 months and expectations for economic conditions in the coming year fell by 4.5% and 6.5%, respectively, reflecting heightened uncertainty surrounding 2026.

Interest rate expectations were cited as the primary factor weighing on sentiment. Nearly two-thirds of consumers who expressed a view now expect mortgage rates to rise over the next 12 months, more than double the proportion recorded in September.

Confidence in employment prospects also weakened, with a growing share of households anticipating an increase in unemployment. This trend aligns with signs of a softening labor market.

Despite the decline, consumer confidence remains well above the lows recorded during the 2022–2024 cost-of-living crisis.

Australia’s central bank is widely expected to keep interest rates unchanged at its upcoming meeting in February and through the remainder of 2026.