Australian consumers remain largely pessimistic in May as there is little improvement in their sentiment, despite the easing of oil price hikes, Westpac said on Tuesday.
The Westpac Consumer Sentiment Index grew 3.5% to 83 as fuel prices eased from increasing amid the ceasefire between the U.S. and Iran. U.S. President Donald Trump paused a scheduled attack against Tehran on Monday after the latter sent a peace proposal to the White House.
"Responses over the course of the survey week show a slight improvement in sentiment following the Federal budget announcement on Tuesday. This is despite few consumers expecting to benefit directly," Matthew Hassan, Westpac's head of Australian macro-forecasting, said.
Last week, the Federal Government announced the budget for the 2026-2027 fiscal year. The underlying cash deficit is expected to be AU$31.5 billion, a slight improvement of AU$2.8 billion. The underlying cash balance was upgraded by AU$44.9 billion over the five years to the 2029-2030 fiscal year, Commonwealth Bank said.
In another Westpac note, the bank said the deficit in the 2028-2029 is expected to widen to AU$34.4 billion due to high energy prices and interest rates, but is expected to narrow to AU$25.3 billion in the following fiscal year.
However, rate hikes were a key factor to offset the positive news of the easing fuel price spike. The Reserve Bank of Australia decided to raise rates by 25 basis to 4.35% earlier in the month and inflation remains above the 2% and 3% target range.
The Westpac consumer survey also showed a gap in age groups. Sentiment among the "baby boomers" and Generation X was weak, with a 70 index, while millennials are modestly pessimistic, with an average index of 94.6. Generation Z has been outright positive with a 104 index.
"Sentiment generally declines with age, moving 1 percentage point lower every two years," Hassan said. "However, the generational gap has widened materially in 2026."
