Just caught the latest Westpac consumer sentiment data and it's painting a pretty grim picture for Australian households right now. The sentiment index dropped to 92.9—that's a 1.7% slide from December—and we're still firmly in pessimistic territory, well below the 100 neutral mark.

What's interesting is where the real pain points are. People aren't just worried about interest rates in the abstract; the survey shows nearly two-thirds of consumers now expect mortgage rates to climb over the next 12 months. That's wild compared to September when it was less than a third. The consumer sentiment around personal finances specifically tanked 4.5% when looking ahead, and expectations for broader economic conditions dropped even harder at 6.5%.

Job security is another major concern. You're seeing more households bracing for unemployment to rise, which tracks with what we've been observing in the labor market lately. It's this compounding effect—rate anxiety plus employment uncertainty plus deteriorating consumer sentiment all feeding into each other.

That said, Westpac did note that despite this decline, we're actually in better shape than during the 2022-2024 cost-of-living crisis when sentiment hit rock bottom. So there's that context. And the expectation is the RBA will hold rates steady through February and most of 2026, which might at least provide some stability.

Overall, the consumer sentiment index tells you people are in a cautious mindset heading into the year. Worth monitoring how this plays out.