Consumer Sentiment Slips 9% in December

• Consumer sentiment retreated in December, with the Westpac–Melbourne Institute index dropping 9% to 94.5, unwinding much of November’s rebound.
• The pullback was led by a sharp deterioration in economic expectations, as the 12-month outlook sub-index slid 9.7% to 94.6, reflecting growing caution about the year ahead.
• Labour market confidence proved more resilient, with the unemployment expectations index easing 9.1% to 126.8, pointing to a broadly stable jobs outlook as market focus remains firmly on inflation pressures.
• The survey reinforces how tightly sentiment is tied to the RBA outlook. When rate cuts appear closer, confidence lifts; as the risk of further tightening returns, optimism fades.
• That shift is already feeding into forecasts, with the NAB Economics team now calling for a 25bp hike in February and another in May, which would take the cash rate to 4.10%.