Unemployment fears rise as rate expectations ease

The Westpac Melbourne Institute Unemployment Expectations Index surged by 3.7 per cent to 138.4 in September. This marks an 11 per cent increase since April and places the index significantly above its long-term average of 129.

According to Westpac’s head of Australian macro-forecasting Matthew Hassan the higher index readings suggest that more consumers anticipate a rise in unemployment over the coming year.

The increase in unemployment expectations has been particularly pronounced among employed consumers.

“Unemployment expectations across this sub-group [jumped] 8.3 per cent in the month to its highest level since 2016 (excluding the COVID period),” Hassan said.

In contrast, concerns about rising interest rates have eased despite the rising unemployment fears.

The Westpac-Melbourne Institute Mortgage Rate Expectations Index fell by 8.6 per cent to 123.8.

This is the lowest reading since April. Just under half of consumers now expect mortgage rates to rise over the next year, a decrease from more than two-thirds in July.

Housing sentiment presents a mixed picture, with weak buyer sentiment paired with optimistic price expectations, though variations are notable across states.

Meanwhile, the ‘time to buy a dwelling’ index increased by 6.6 per cent to 76.1 overall.

However, state-level changes showed considerable variation, with NSW (+19.4 per cent) and Victoria (+9.9 per cent) seeing gains, while Queensland (-17.9 per cent) and Western Australia (-6.4 per cent) experienced declines.

These shifts reflect differing price performances and changes in affordability. Soaring prices have pushed the ‘time to buy a dwelling’ index down into the 60–70 range in Queensland and Western Australia, compared to higher index readings of 79 in Victoria and 84 in NSW.

Even in these states, overall buyer sentiment remains pessimistic, with the national long-term average at 117.

Price expectations also tell a mixed story. The Westpac Melbourne Institute Index of House Price Expectations fell by 4.6 per cent to 150.5, reaching a 15-month low.

The decline was primarily driven by Victoria (-8.5 per cent) and NSW (-5.6 per cent), while price expectations increased in Queensland (+3.7 per cent) and Western Australia (+0.5 per cent). Despite these variations, a clear majority of consumers still expect house prices to rise.

The Reserve Bank Board is scheduled to meet on 23–24 September. It is anticipated that the official cash rate will remain unchanged, with the bank maintaining its cautious stance on inflation.

Hassan further said: “The latest consumer sentiment survey adds to evidence that the Australian consumer remains weak.

“While that may ease some of the Reserve Bank’s concerns around consumer demand, its main focus is on the extent to which the balance of demand and supply across the wider economy will see high inflation persist.

“As the RBA Governor has flagged in recent commentary, the picture here is likely to evolve more slowly with the September quarter CPI (due October 30) and the September quarter national accounts (due December 4) set to be key updates in the months ahead.”

[RELATED: Rate rise fears dissipate; buyer sentiment at new lows]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.