Consumers more optimistic following interest rate cuts

Consumers are feeling more confident about the future but are still frustrated with the current economic conditions.

The ANZ-Roy Morgan Consumer Confidence index rose 3 points in September to 95.1 - a reading below 100 indicated pessimism.

It was the third straight month of improvement but remained below the long-term average of 114.

ANZ chief economist Sharon Zollner said inflation and interest rates coming down was making consumers feel better about the future.

"Essentially when inflation took off consumer confidence absolutely tanked and then as inflation was falling it was recovering until we got all those nasty recession headlines. But it does seem now that the interest rate cuts have injected a bit more optimism into the picture."

But Zollner said it was important people remembered that inflation easing did not mean prices will drop, instead prices will go up slower.

She said although sentiment was on the up, it did not mean consumers have money to spend right now.

"The perceptions of current personal financial situations for example is -16 but it's well off its recent low. It was -30 in February 2023, it's been basically rising ever since inflation has been falling. So, people are feeling a little more comfortable and that's perhaps a little unexpected, I would say, given unemployment is still rising.

"I think there is light at the end of the tunnel for consumers but the cash flow release from lower interest rates is going to be gradual."

Household inflation expectations remained unchanged at 3.8 percent, while house price expectations rose from 2.8 percent to 3.2 percent year on year.