Confidence takes biggest hit since COVID

According to the Westpac-Melbourne Institute survey, consumer sentiment fell by 12.5% to 80.1 in April 2026. The April result shows how cost-of-living pressures have escalated, with the latest surge in fuel prices adding to the impact of recent interest rate hikes, forcing households to prioritise essentials over discretionary spending.

For retailers, current conditions represent some of the most challenging in recent history. While the COVID‑19 period was partially cushioned by government support and reduced competing spend, current pressures are being felt more acutely as businesses and households operate normally but face significantly higher costs across the board.

The most recent ABS Household Spending indicator showed February 2026 sales were 0.3% higher than January and 4.6% above February 2025. Growth was driven by recreational services and essential food spending, reflecting a change in spending priorities compared to January.

Source: Westpac – Melbourne Institute Consumer Sentiment Index

According to the Westpac‑Melbourne Institute survey, consumer sentiment decreased by 12.5% from 91.6 in March 2026 to 80.1 in April 2026, representing the largest month‑on‑month decline since the onset of COVID. The fall reflects a cost-of-living “shock”, driven by higher fuel prices on top of recent inflation and interest rates increases. Overall, the result points to a materially more cautious consumer.

The sub‑indexes all declined materially in April:

• ‘family finances vs a year ago’ down 16.7% to 66.8;

• ‘family finances next 12 months’ down 13.9% to 84.0;

• ‘economic conditions next 12 months’ down 12.4% to 75.3;

• ‘economic conditions next 5 years’ down 5.1% to 91.4; and

• ‘time to buy a major household item’ down 15.0% to 83.3.

The Unemployment Expectations Index rose 9.7% to 147.8, reflecting increased concerns around job security and was the highest reading in over five years. The Interest Rate Expectations Index increased 3.9% to 177.2, returning to recent cycle highs and indicating consumers continue to expect further mortgage rate increases over the next 12 months. Overall, consumers remain concerned about rising essential costs, tighter financial conditions, and the near‑term economic outlook.

Source: Australian Bureau of Statistics

The most recent ABS Household Spending Indicator (ABS HSI) recorded an increase of 0.3% (seasonally adjusted) in February 2026, compared to January. The increase was primarily driven by services spending (+0.5%), supported by a small increase in goods spending (+0.1%).

Discretionary spending growth (+0.5%) drove February spending, with five of the nine sub-categories increasing in February:

• ‘Recreation and culture’ up 1.1%

• ‘Food’ up 1.0%

• ‘Hotels, cafes and restaurants’ up 0.4%

• ‘Health’ up 0.2%

• ‘Clothing and footwear’ up 0.1%

• ‘Miscellaneous goods and services’ down 0.3%

• ‘Furnishings and household equipment’ down 0.3%

• ‘Transport’ down 0.4%

• ‘Alcoholic beverages and tobacco’ down 0.5%

This increase was driven by spending on concerts, performing arts and recreational activities. Growth was also supported by food spending driven by higher grocery expenditure particularly in meat, fish, and poultry. This was partially offset by lower liquor spending as the holiday season concluded. As the February data predates the escalation of the war in Iran, it does not yet capture the impact of the war‑driven fuel price shock. It will be interesting to see how spending patterns shift in coming months and whether these mirror the sharp deterioration in consumer sentiment seen in April.