Mortgagors more optimistic of finances than outright homeowners, WestPac data shows

Tax cuts beginning to lift sentiment, reckons chief economist Luci Ellis

Mortgagors more optimistic of finances than outright homeowners, WestPac data shows

Sentiment among Australian consumers remains on the pessimistic side, having soured for two months running, according to WestPac’s latest data print.

The Westpac–Melbourne Institute Consumer Sentiment Index published on Tuesday showed a 0.7% decline this month, following a heftier 2% drop in December.

However, the data revealed a bright spot among those currently paying off their mortgages. While renters and outright homeowners recorded further pessimism in their assessment of their personal finances, mortgagors recorded a 15% increase.

According to WestPac’s chief economist Luci Ellis, this was likely a result of the emerging benefits of tax cuts implemented by the Labor government midway through 2024.

Effective from 1 July, prime minister Anthony Albanese’s government reduced the 19% tax rate to 16% and the 32.5% tax rate to 30%.

“Mortgagors are less likely to be retired than the other two groups and thus more likely to have benefited from last year’s tax cuts,” noted Ellis.

“Still, the result highlights that the positive impact of the tax cuts on take-home pay needs to be balanced against all the other factors that have been dragging on families’ finances, including ongoing cost-of-living pressures,” she added.

Mortgagors are also comparatively more optimistic that the Reserve Bank of Australia (RBA) will go ahead with an interest rate cut in February, aligning with the expectations of ANZ analysts, who predict a 25-basis-point cut next month.

WestPac, however, remains more pessimistic on this front. Alongside today’s Consumer Sentiment Bulletin, the bank reaffirmed the board’s stance that the RBA will leave interest rates unchanged in February, “with an easing expected to commence in May”.

The consumer sentiment data also showed that consumers have become more pessimistic on the outlook for house prices, particularly in Queensland, South Australia and Tasmania.