Consumer confidence has been on a rollercoaster in the month of February over forecasts of and the eventual announcement that the Reserve Bank of Australia (RBA) is cutting interest rates for the first time since 2020.

Australia has been one of the only countries to hold interest rates at post-pandemic levels, with the hope that keeping living expensive high will stave of growing inflation. On Tuesday (18 February) the RBA announced that inflation was easing from it 2022 high, and that they are cautiously confident in cutting rates to 4.10 per cent.

“Inflation has continued to ease, and underlying inflation is expected to return to the 2–3 per cent range a little sooner than we thought,” the RBA said in a statement. “The labour market has been surprisingly strong.”

However the RBA remains cautious due to a volatile global economic outlook driven by US president Trump’s rash trade policies and international tensions.

“The global economic outlook is uncertain due to new trade policies and international tensions,” the RBA statement continues.

Those trade policies include tariffs imposed by the US on Mexico, Canada, as well as steel and aluminium. In turn US data revealed recently that inflation has increased since the Federal Reserve started cutting interest rates.

At the start of February, the ANZ-Roy Morgan Consumer Confidence Index jumped 2.5 points to 88.5 – the strongest level since May 2022.

Driven by improving economic outlook, falling inflation expectations, and the forecast of RBA cuts, ANZ economist Sophia Angala said that economic confidence over the next five years has reached a 12 month high.

“Households are feeling more confident about the economic outlook, with short-term economic confidence rising to its highest level since April 2022 (before the first rate hike in May 2022), while economic confidence over the next five years reached a 12-month high.”

However just a week out from the announcement consumer confidence dropped 1.6pts to 85.1, with rising concerns about personal finances and the Australia economy over the next year blamed for the drop – the lowest point so far this year.

It’s likely that despite the promise of rate cuts, global instability and ongoing cost of living pressures mean that consumers remain cautious.

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