Inflation and cash rate forecasts push sentiment down for the ninth consecutive month

Consumer sentiment fell by 3.0% to 81.2 in August 2022, falling for the ninth consecutive month since the most recent peak in November 2021 (105.3). This continual decline in sentiment is driven by ongoing inflation pressures and interest rate rises, which have created consistent and mounting pressure on household budgets. Retail sales continue to hold up despite the consumer pessimism, with ABS retail sales for June 2022 showing a seasonally adjusted increase of 0.2%. While sales have been growing, the rate of growth has slowed in recent months. Online retail sales fell for a fifth consecutive month, declining by a further 1.5% (seasonally adjusted) in June. Retailers have faced continued and growing pressure on their margins but have benefitted from consistent consumer spend to date, driven by low unemployment rates (3.5%) and strong household savings.

Consumer confidence

1 month
12 months

Source: Westpac – Melbourne Institute Consumer Sentiment Index


Consumer sentiment fell in August 2022 by 3.0% to 81.2, according to the Westpac-Melbourne Institute Index of Consumer Sentiment. The Index has fallen every month since November 2021 (cumulative decrease of 22.9%) and is now at levels similar to the GFC. The survey was conducted shortly after the RBA announced the fourth consecutive cash rate increase, adding to cost of living pressure on households. Confidence for those with mortgages who were most affected by the rate rise fell significantly (-8.9%), while modest declines were recorded for tenants (-0.2%) and owners without mortgages (-2.1%). The most material declines in the component indexes occurred in the ’12-month economic outlook’ (-8.0%) and ‘time to buy a major household item’ (-8.4%). Household spending has remained buoyant despite deteriorating sentiment, supported by a strong labour-market and household savings accumulated during the pandemic. We anticipate discretionary spend will begin to moderate in the coming months and some evidence suggests consumers are already starting to curtail discretionary retail spend with CBA Card Spend Data (to 15 July 2022) falling 2.0% since the recent peak in May 2022.

Retail sales

1 month
12 months

Source: Australian Bureau of Statistics


The most recent ABS retail sales data for June 2022 reported a 0.2% increase in sales to $34.2 billion (seasonally adjusted). June 2022 sales were $3.67 billion higher than June 2021 sales (+12.0% vs June 2021, +15.4% vs June 2020), noting the most recent sales months incorporate a level of inflation rather than just volume growth. The moderate growth in June was driven by a strong improvement in cafes, restaurants, and takeaway food services (+2.7%), while department stores experienced a 3.7% decline.

Online retail sales

1 month
12 months

Source: NAB Online Retail Sales Index


Online retail sales recorded a fifth consecutive month of decline in June 2022 (-1.5%, seasonally adjusted), and remains slightly down in year-on-year terms (-0.1% v June 2021). Most categories recorded contractions in June 2022, with takeaway food experiencing the largest contraction (-7.1%), despite continuing to lead growth in year-on-year terms. Online retail sales are estimated to represent 14.5% of total retail sales which represents more than 14% growth over the previous year. The 2021 census results have revealed that Millennials are set to overtake Baby Boomers as the largest generational group in Australia, with their influence anticipated to further fuel the shift towards online shopping, which is forecast to grow towards 20% of total sales.


Damien Pasfield

Damien Pasfield
Director, Sydney
T: +61 2 9338 2691
E: dpasfield

Kim Domleo

Kim Domleo
Senior Analyst, Sydney
T: +61 2 9338 2648
E: kdomleo