Consumer confidence turns positive ahead of year-end sales

According to the Westpac–Melbourne Institute survey, consumer sentiment increased by 12.8% to 103.8 in November 2025. This marks the first net positive reading since February 2022 and reflects a surprisingly upbeat consumer despite lower expectations of a near-term interest rate cut. After a long period of caution, households appear more confident that conditions are no longer worsening, with optimism being driven by a stabilising economic outlook and easing international trade tensions. Consumers appear more willing to engage in major purchases ahead of the Christmas trading period, which is excellent timing for retailers ahead of sales season.

While the result is encouraging, sentiment should be viewed with some caution. The improvement appears largely forward-looking, with many households still feeling cost-of-living pressures. Consumers remain deliberate and value-driven, seeking meaningful discounts and experiences that justify their spend. In a competitive sales environment, retailers that can differentiate through personal service, genuine value, and in-store engagement combined with excellent online service will be best placed to capture discretionary spend.

The most recent ABS Monthly Household Spending Indicator recorded a modest 0.2% increase in September 2025, up 5.1% year-on-year, led by higher spending on recreation, health, and food. NAB Online Retail Sales rose 0.5% in September 2025 and were 12.5% higher year-on-year, supported by continued growth in categories such as takeaway food and leisure products.

Source: Westpac – Melbourne Institute Consumer Sentiment Index

According to the Westpac-Melbourne Institute survey, consumer sentiment increased by a somewhat surprising 12.8% from 92.1 to 103.8 in November 2025. This marks the first net positive result since February 2022 and, adjusting for the COVID-19 related volatility in 2020 and 2021, reflects the most positive result in seven years. Overall, the index still sits only in marginally positive territory but represents the end of a prolonged period of consumer pessimism driven by inflationary pressures, interest rate volatility, and rising tax payments.

The sub-indexes all increased in November 2025:

• ‘economic conditions next 12mths’ up 16.6% to 104.8;

• ‘economic conditions next 5yrs’ up 15.3% to 108.4;

• ‘time to buy a major household item’ up 14.9% to 111.6;

• ‘family finances next 12mths’ up 12.3% to 109.1; and

• ‘family finances vs a year ago’ up 3.7% to 85.2.

The November result was driven by a vastly more positive consumer outlook for economic conditions, with forward-looking sub-indexes now in positive territory. Domestically, the move in consumer economic expectations reflects positive indicators of a stronger recovery in housing and consumer demand more generally. Internationally, easing trade tension between the US and China and positive dialogue between the US and Australia on critical minerals and rare earths also appears to be having a positive impact.

The family finances sub-indexes also rose in November, with the forward-looking indicator increasing by 12.3%, signaling households anticipate further relief in living costs into 2026. We note however that the index which reflects attitudes to current conditions compared to a year ago only increased by 3.7% and remains firmly pessimistic at 85.2, suggesting the consumer is still feeling cost of living pressure, causing us to look at the general improvement with more caution. The ‘time to buy a major household item’ sub-index also increased by 14.9% to 111.6, its highest level in four years, reflecting growing willingness to spend heading into the largest sales period of the year. Consumers remain price-conscious, but sales-events such as Black Friday and Cyber Monday are expected to attract strong participation.

Source: Australian Bureau of Statistics

The most recent ABS Household Spending Indicator (ABS HSI) recorded a 0.2% increase (seasonally adjusted) in September 2025, representing a 5.1% or $3.8bn increase on September 2024. The modest gain follows flat growth in August (+0.1%), with September’s increase driven by higher spending on non-discretionary categories overall.

Household spending by sub-category was mixed across the month:

• ‘Recreation and culture’ up 1.1%

• ‘Health’ up 0.7%

• ‘Food’ up 0.6%

• ‘Furnishings and household equipment’ up 0.4%

• ‘Miscellaneous goods and services’ down 0.1%

• ‘Hotels, cafes, and restaurants’ down 0.3%

• ‘Transport’ down 0.4%

• ‘Clothing and footwear’ down 0.6%

• ‘Alcoholic beverages and tobacco’ down 0.8%

Growth in September was led by ‘Recreation and culture’ (+1.1%) as households responded to the start of spring and warmer weather by increasing spending on outdoor and leisure activities. The ‘Alcoholic beverages and tobacco’ subcategory recorded the largest decline in September at 0.8%, continuing its trend of consistent month-on-month declines over the past two years. This is partially representative of a broader cultural shift among Gen-Z and millennials, but also only shows legal purchases of cigarettes and tobacco products i.e. doesn’t reflect the impact of illicit tobacco consumption.

Spending on goods increased by 0.4% in September 2025, while services spending remained flat (+0.0%). On an annual basis, services spending continues to outpace good spending, rising 7.2% between September 2024 and September 2025 compared to 3.4% for goods over the same period. The overall 0.2% rise in the ABS HSI in September 2025 reflected flat discretionary spending (+0.0%) and a 0.6% increase in non-discretionary spending. The increase in non-discretionary spending reflected higher spending on motor goods, health, and food, while flat discretionary spending reflected gains in recreation and culture which were offset by declines in air travel and accommodation.

Source: NAB Online Retail Sales Index

The NAB Online Retail Sales in September 2025 increased by 0.5%, following a revised decrease of 0.2% in August 2025. Growth remained high in year-on-year terms, with seasonally adjusted sales increasing 12.5% between September 2024 and September 2025. Growth was mixed with strong acceleration in takeaway foods (+4.8%), and games and toys (+2.3%) with a slight decrease in department stores (-0.5%), similar to the month prior. WA dominated in online retail growth (+2.6%), with rebounds from VIC (+0.6%), QLD (+0.6%), and TAS (+0.4%) able to offset spending falls in ACT (-1.7%), NT (-0.2%) and NSW (-0.2%). NAB data estimates Australians spent $66.23 billion on online retailing, making up 14.9% of total retail spend.