Australian consumer confidence saw a notable increase last week, driven by rising expectations that the Reserve Bank of Australia’s (RBA) next move could be to lower interest rates. Despite this boost, the overall level of confidence remains subdued, reflecting ongoing concerns about a potential recession in the economy.

According to a survey conducted by ANZ Bank and Roy Morgan, consumer confidence rose by 2.6 points last week to reach 83.9 points. The four-week moving average also showed an improvement, climbing by 1.4 points to 83.2 points. This data follows the RBA’s decision to maintain its official cash rate at 4.35%, a level that has been unchanged since November.

Although RBA Governor Michele Bullock has ruled out an immediate interest rate cut, economists continue to anticipate that the central bank may lower the Official Cash Rate (OCR) in early 2025. However, the RBA’s narrative remains cautious, with Bullock emphasizing that the bank is not ruling out any possibilities, reflecting concerns over persistent inflationary pressures.

Household budgets have recently received a boost from income tax cuts and government rebates aimed at offsetting rising electricity costs. These financial aids may have contributed to the improvement in consumer sentiment. The survey showed that all subindices experienced growth, with a significant jump in household confidence regarding current financial conditions, which rose by 7.1 points—its largest weekly increase since late last year.

The rise in confidence may be linked to the RBA’s decision to keep rates on hold, as well as the positive effects of the income tax cuts that took effect on July 1, according to ANZ economist Madeline Dunk. Meanwhile, weekly inflation expectations remained steady at 5.1%, with the four-week moving average also unchanged at 5.1%.

The weekly ANZ-Roy Morgan Australian consumer confidence rating is based on 1,503 interviews conducted online and over the telephone during the week ending Sunday.