Consumer confidence at its lowest in Australia since 1990s recession
High interest rates and the cost-of-living crisis are creating a gloomy outlook among many
2 min
Consumer confidence fell in January to its lowest level for the first month of a new year since the 1990s recession. The Westpac-Melbourne Institute Consumer Sentiment Index fell 1.3 percent to 81 points. Westpac senior economist Matthew Hassan said this reading was in the bottom 7 percent of all sentiment measures ever recorded since the survey began in the mid-1970s.
“For consumers, the new year looks to have picked up where the old one left off: cost of living and high interest rates continuing to dominate and sentiment bumping around deeply pessimistic levels,” Mr Hassan said. “The continued weak reads on sentiment show Australian consumers remain under intense pressure as the surging cost of living, materially higher interest rates and rising tax take weigh heavily on incomes.”
The sub-indexes measuring consumers’ outlook for the economy and their personal finances in 2024 remained “materially below long-term averages”. Mr Hassan said there was a further deterioration in family finances this month.
“The ‘finances compared to a year ago’ sub-index dropped 7.6 percent to 63, unwinding most of the 11 percent improvement seen over the three months to December. Those in low- and middle-income brackets reported the biggest deterioration in the month.”
Australians are also worried about the medium to long-term prospects for the economy. Consumers’ five-year outlook on the economy fell 6.1 percent to 89.1 points, with young renters driving this fall.
Just over half of the 1,200 people who participated in the survey said they expected interest rate rises to continue in 2024. This is down from 60 percent in December and follows the lower monthly inflation reading of 4.3 percent in November, as well as expectations in the United States that the Federal Reserve will begin cutting interest rates in the world’s biggest economy this year.
Mr Hassan commented that Australian consumers are much more ‘hawkish’ on rates than the financial markets and economists. “While just over half of consumers expect mortgage rates to rise, futures markets are currently pricing in 50bps in cuts by year-end, with three out of four economists also expecting the cash rate to move lower,” he said.
Housing-related sentiment continued to show “a stark gap between buyer sentiment and price expectations”, Mr Hassan noted. The ‘time to buy a dwelling’ sub-index fell 3.1 percent to 72 points, which is considered very weak. More than two-thirds of consumers expect house prices to rise in 2024. This follows a surprising 8.6 percent lift in the national median house price in 2023, according to CoreLogic data.
This price growth was largely due to fewer homes for sale, more cash buyers at the market’s upper end, greater demand in cheaper suburbs, which resulted in strong price growth, and increased first home buyer activity facilitated by the Bank of Mum and Dad and the expanded First Home Guarantee scheme.
Looking ahead, the December quarterly inflation read to be released by the Bureau of Statistics on 31 January will be critical to the Reserve Bank’s next interest rate decision on 6 February, said Mr Hassan.
“On balance, we expect the RBA to leave rates unchanged in February, and to be unlikely to raise rates further from here,” he said. “However, a material upside surprise on inflation would make for a more finely balanced decision.”
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The Federal Budget may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.
3 min
For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.
The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:
Is the way we hold our wealth still fit for purpose?
In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.
The backdown is welcome. But it also highlights something much bigger.
This Budget has accelerated a conversation that many Australian families have been postponing for years.
The conversation is not really about tax. It is about wealth stewardship.
For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.
We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.
Their children are now adults. They may own multiple properties.
They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.
The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.
The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.
Importantly, trusts themselves are not the issue.
Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.
And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.
The real issue is complacency.
Too often, families create structures and assume the job is done. It isn’t.
Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.
We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.
Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.
At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.
How do you help your children enter the property market without exposing family wealth to relationship breakdowns?
How do you structure wealth so that it remains a source of opportunity rather than future conflict?
These are the questions families should be asking now.
The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.
But the lesson remains: the wealth landscape is changing.
Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.
The families who will be best placed for the future are not necessarily those with the greatest wealth.
They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.
Ultimately, preserving wealth is not about avoiding change.
It is about preparing for it.
Because the greatest risk is not change itself.
It is losing the ability to respond to it.
Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer
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