‘No interest rate cuts’: Aussies delivered warning after Westpac report shows consumer sentiment surged in November

A fresh report has shown Aussie shoppers are feeling more optimistic, although this could spell trouble for those banking on future rate cuts.

Consumer sentiment lifted almost 13 per cent in November according to Westpac and the Melbourne Institute’s consumer sentiment index.

This marks the first net positive result since early 2022.

The uplift follows an extended period of consumer pessimism as disposable incomes were hurt by high inflation and crippling interest rates.

Recent interest rate cuts have been cited as a contributor to the recent lift in consumer sentiment and inflation, with the Reserve Bank on Monday arguing there is “little room” for future rate cuts.

Sky News Business Editor Ross Greenwood said Westpac’s survey showed why the nation’s central bank had concerns about demand outpacing supply.

“The reason why this is important right now is because what the Reserve Bank is watching for is signs of consumer activity,” he said on Business Now.

“The problem is if consumers get too active it pushes up inflation which means no interest rate cuts – not any time soon.”

Westpac’s head of Australian macro-forecasting Matthew Hassan said the rise of consumer sentiment seemed to have outweighed renewed concerns about inflation and interest rates.

“Higher than expected ‘partial’ inflation reads had clearly unsettled consumers in previous months,” Mr Hassan said in the consumer sentiment report.

“Ordinarily, the surprisingly strong September quarter CPI, released in late October, and the Reserve Bank’s decision to leave the cash rate on hold at its November meeting would have been expected to have added to these concerns.

“These negatives appear to have been less pervasive in November.”

He added the RBA’s decision to hold interest rates last week seemed to have less impact on consumer sentiment than expected after soft warnings from the central bank.

“The Bank could have sent a more hawkish message on inflation than it did,” Mr Hassan said.

“Instead, it assessed that some of the recent rise was due to temporary factors.

“The Governor also revealed that the RBA had not considered raising the cash rate at the November meeting.”

The publication of the report follows RBA deputy governor Andrew Hauser warning the economy faces capacity constraints.

This means inflation could start to surge as demand outpaces supply.

Money markets are pricing in the next move of interest rates to be down, although the odds of this happening do not exceed 50 per cent until June 2026.