Consumer confidence in Australia remains subdued, with the Westpac Melbourne Institute Consumer Sentiment Index recording a 2.4 per cent decline to 82.4 in April, down from 84.4 in March. This prolonged period of pessimism, marking nearly two years, indicates that pessimists significantly outnumber optimists, with the index remaining well below the neutral mark of 100.

The current sentiment levels reflect one of the most extended periods of consumer pessimism in Australia since surveys began in the mid-1970s, only surpassed by the deep recession of the early 1990s. The persistence of this downturn is attributed to Australia's ongoing inflation challenge, which has seen consumer price rises outpacing wage growth by 6 percentage points over the past three years. Additionally, increased interest rates and tax payments have placed considerable pressure on household incomes, as per Westpac.

Unlike previous downturns, which were often the result of shocks to economic growth without the added complexity of inflation, the current situation is exacerbated by inflation rates remaining above the Reserve Bank of Australia's (RBA) target of 2-3 per cent, limiting the effectiveness of monetary and fiscal policy interventions.

April's sentiment update also revealed that consumers are cautious about the future, with little optimism for significant progress on inflation and cost-of-living pressures. Expectations for interest rate cuts remain low, with the Westpac-Melbourne Institute Mortgage Rate Expectations Index indicating a slight shift towards a more hawkish outlook on rates.

However, there are some positive signs, particularly regarding expectations for family finances, buoyed by upcoming tax cuts in July. Despite this, the overall economic outlook and buyer sentiment have deteriorated, with the latter affected by rising prices impacting purchasing power.

State-wise, sentiment showed a slight improvement in New South Wales but fell more sharply in other major states, with Queensland experiencing a significant decline.

On a brighter note, Australia's labour market remains a strong point, with the Westpac-Melbourne Institute Unemployment Expectations Index indicating more optimistic expectations for job security, marking the best result since May last year.

Fibre2Fashion News Desk (DP)

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