The latest data from ANZ-Roy Morgan and the Westpac Melbourne Institute shows consumer confidence has not dampened, but caution prevails.

ANZ-Roy Morgan Consumer Confidence index was virtually unchanged at this week, sitting at its highest level for over three months since late September 2022. However, it is still 10.5% below the same week a year ago.

There were small increases in confidence relating to personal financial situations while there was virtually no change in views on the Australian economy.

Consumer confidence was mixed around the country, up in Victoria and Western Australia, for the first time this year, but down in NSW, Queensland and South Australia. Victoria is the only mainland state where it has increased for the first two weeks of 2023.

Sentiment regarding the Australian economy in the longer term is still weak with only 14% expecting ‘good times’ for the economy over the next five years.

ANZ senior economist, Adelaide Timbrell said while confidence about ‘current economic conditions’ fell slightly, households have become more optimistic about their finances. The ‘financial situation next year’ sub-index rose to its highest since late April 2022, before increases in the cash rate began.

“It is worth noting, that stronger confidence is not necessarily a leading indicator of stronger spending. ANZ-observed spending data shows weaker spending in the first week of 2023 compared to the previous year,” she said.  

The Westpac Melbourne Institute Consumer Sentiment Index increased 5%, its biggest hike in 22 months.

“One likely explanation for the lift in confidence is that January was the first month since April last year that did not see an increase in the RBA cash rate,” according to Westpac chief economist Bill Evans. “While there was no RBA Board meeting in the month, the break in the tightening cycle looks to have provided some relief.” However, he remained cautious about reading the January sentiment rise as part of a continuing trend.

The ‘time to buy a major household item’ sub-index lifted 3.6% but remains at a pessimistic level by historical standards with surging prices and associated declines in purchasing power are still heavily affecting purchase attitudes, Evans said.

“As we move through 2023, we expect inflation pressures to ease, slowly boosting confidence although it is likely to remain well below par during the year.”

He said multiple legacies from the pandemic that boosted spending in 2022 including the reopening surge, a large, accumulated pool of excess household savings and the extremely tight labour market, will also fade in 2023.