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Westpac Banking : MI Consumer Sentiment October (PDF 75KB)

10/12/2021 | 07:42pm EST


13 October 2021

Consumer Sentiment holds a positive line despite lock downs

The Westpac-Melbourne Institute Index of Consumer Sentiment decreased by 1.5% to 104.6 in October from 106.2 in September.

Despite both Sydney and Melbourne remaining in lock down throughout the last month consumers are relatively upbeat. At 104.6 there continues to be a clear majority of optimists nationally with little difference in the state readings - NSW (103.4); Victoria (105.4); Queensland (105.3) and Western Australia (105.4) all show similar majorities of optimists. This is despite a sharp contrast between the lock down status of NSW/ Victoria and Queensland/Western Australia.

Consumers in NSW and Victoria are clearly looking towards their states' reopening as vaccine coverage reaches globally competitive rates. Just over 90% of the eligible population in NSW and 85% of the eligible population in Victoria have now received at least one vaccine dose, 15-20% ahead of Queensland and Western Australia.

This theme is best exemplified by the contrast in confidence between respondents who are not vaccinated but intend to be vaccinated - with an index read of 122.0 - and those who are not vaccinated and do not intend to get vaccinated - with an index read of 84.8.

The confidence level of those not intending to get vaccinated has also fallen quite sharply in the last month, down 8.7% to

84.8 from 92.9 in September. Encouragingly, the size of this group has fallen as well, accounting for only 6% of respondents in the October survey compared to 9% in September and just under 20% at the start of the year.

The success and pace of vaccine-led re openings in NSW and Victoria in conjunction with the efforts of Queensland and Western Australia to lift vaccination rates while remaining COVID-free will likely determine the profile of national confidence over the next few months.

The detail points to a more nuanced response to vaccine roll outs in NSW and Victoria. Sentiment posted modest gains in Sydney (+1.2%) and Melbourne (+3.9%), buoyed no doubt by prospects of an end to extended lock downs.

In contrast, sentiment fell steeply in regional areas, down 10.6% in regional NSW and 8.2% in regional Victoria. It is likely that the key explanation for this discrepancy is concerns about what the easing of restrictions, including intra-state travel, may bring for those regional areas with lower vaccination rates and weaker health systems.

Component-wise, shifts were relatively small with optimism centred on economic prospects while views around family finances remain subdued.

The 'economic conditions, next 12 months' sub-index declined 1.7% but remained in firmly optimistic territory at 103.2, up nearly 10% on a year ago. The 'economic conditions, next 5 years' sub-index posted a more meaningful 5.6% decline but was coming off a strong 4.8% gain last month and at 108.1 is

Consumer Sentiment Index















Sources: Westpac Economics, Melbourne Institute








still in solid optimistic territory, well above long run averages. Interestingly, the detail in this sub-group showed a more pronounced 7.8% decline amongst consumers with a mortgage, possibly an early sign of concerns that mortgage interest rates may be rising over this longer time horizon.

Views on family finances were more mixed. The 'finances, next 12 months' sub-index increased slightly by 0.5% but the 'finances vs a year ago' sub-index is down 1.7%. Both remain slightly above their long run average levels.

The 'time to buy a major household item' sub-index posted a modest 0.9% gain but remains at a relatively subdued level of

109.9. The long run average is 126.6. Easing COVID restrictions may provide more support for buyer sentiment in NSW and Victoria in the months ahead.

Reopening expectations gave a big boost to confidence around jobs. The Westpac Melbourne Institute Index of Unemployment Expectations fell 11.1% to a six-month low of 107.1 (recall that a fall in the Index means more respondents expect unemployment to fall in the year ahead). NSW recorded a particularly strong improvement, the state index dropping 16.4% to 97.7, to a 16- year low.

After briefly recovering somewhat last month the 'time to buy a dwelling' index took another sharp hit in October. The Index fell by 13.8% to be down by 37% from its peak in November last year. The fall is almost certainly due to the sharp deterioration in affordability over the last year, dwelling prices having surged 20% nationally over that time. Mid-way through the survey week the Australian Prudential Regulation Authority announced a tightening in loan serviceability guidelines for mortgage lenders. This announcement, which is likely to be followed by further initiatives in the new year, almost certainly weighed on homebuyer sentiment.

In contrast the Westpac Melbourne Institute Index of House Price Expectations held at 156.3, remaining near eight-year highs. That is down only 1% from September, although we

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.



15 September 2021

did see quite a sharper 9.3% pull-back in NSW, suggesting consumers are starting to see prices become more stretched in the Sydney market.

The Reserve Bank Board next meets on November 2. The Board will almost certainly maintain its policy settings. The next change is likely to involve a further scaling back in weekly bond purchases at the February meeting, from $4 billion to $2 or $3 billion.

The focus next week will be on the Bank's revised growth forecasts which will be discussed at the Board meeting and formally released in the November Statement on Monetary Policy on November 5.

Of most interest will be the Bank's estimate of the likely contraction in the economy in the September quarter; the pace of recovery; and whether recent developments have changed the Bank's assessment of the timing of its progress towards achieving its inflation and full employment goals.

Westpac expects the RBA will achieve these objectives by the end of 2022 laying the foundation for an increase in the cash rate of 0.15% in the March quarter of 2023. The Reserve Bank is of the view that it will need to wait until 2024 before it will increase the cash rate

Bill Evans, Senior Economist, ph (61-2) 8254 8531

Consumer Sentiment - October 2021



Oct 2019

Oct 2020

Sep 2021

Oct 2021



Consumer Sentiment Index








Family finances vs a year ago








Family finances next 12mths








Economic conditions next 12mths








Economic conditions next 5yrs








Time to buy a major household item








Time to buy a dwelling








Unemployment Expectations Index








House Price Expectations Index








Source: Westpac-Melbourne Institute.

*avg over full history of the survey, all indexes except 'time to buy a dwelling', 'unemployment expectations' and 'house price expectations' are seasonally adjusted

Survey interviews are conducted by OZINFO Research on the telephone using trained interviewers. Telephone numbers and the household respondent are selected at random. This latest survey is based on 1200 adults aged 18 years and over, across Australia. It was conducted in the week from 4 October to 8 October 2021. The data

have been weighted to reflect Australia's population distribution. Copyright at all times remains with the Melbourne Institute of Applied Economic and Social Research.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.




© Copyright 2021 Westpac Banking Corporation

Things you should know.

Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 ('Westpac').


This material contains general commentary only and is not intended to constitute or be relied upon as personal financial advice. To the extent that this material contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on it, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs, and, the disclosure documents (including any product disclosure statement) of any financial product you may consider. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This material may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure the information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of the information, or otherwise endorses it in any way. Except where contrary to law, Westpac and its related entities intend by this notice to exclude liability for the information. The information is subject to change without notice and none of Westpac or its related entities is under any obligation to update the information or correct any inaccuracy which may become apparent at a later date. The information contained in this material does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter

a legally binding contract. Past performance is not a reliable indicator of future performance. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Country disclosures

Australia: Westpac holds an Australian Financial Services Licence (No. 233714). This material is provided to you solely for your own use and in your capacity as a client of Westpac.

For XYLO Foreign Exchange clients: This information is provided to you solely for your own use and is not to be distributed to any third parties. XYLO Foreign Exchange is a division of Westpac Banking Corporation ABN 33 007 457 141 and Australian credit licence 233714. Information is current as at date shown on the publication. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. XYLO Foreign Exchange's combined Financial Services Guide and Product Disclosure Statement can be obtained by calling XYLO Foreign Exchange on 1300 995 639, or by emailing customercare@ XYLO.com.au.

New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac or Westpac New Zealand Limited ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz. For further information please refer to the Product Disclosure Statement (available from your Relationship Manager) for any product for which a Product Disclosure Statement is required, or applicable customer agreement. Download the Westpac NZ QFE Group Financial Advisers Act 2008 Disclosure Statement at www.westpac.co.nz.

China, Hong Kong, Singapore and India: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients in Singapore of this material should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore. Westpac Hong Kong Branch holds a banking license and is subject to supervision by the Hong Kong Monetary Authority. Westpac Hong Kong branch also holds a license issued by the Hong Kong Securities and Futures Commission (SFC) for Type 1 and Type 4 regulated activities. This material is intended only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance. Westpac Shanghai and Beijing Branches hold banking licenses and are subject to supervision by the China Banking and Insurance Regulatory Commission (CBIRC). Westpac Mumbai Branch holds a banking license from Reserve Bank of India (RBI) and subject to regulation and supervision by the RBI.

UK: The contents of this communication, which have been prepared by and are the sole responsibility of Westpac Banking Corporation London and Westpac Europe Limited. Westpac (a) has its principal place of business in the United Kingdom at Camomile Court, 23 Camomile Street, London EC3A 7LL, and is registered at Cardiff in the UK (as Branch No. BR00106), and (b) authorised and regulated by the Australian Prudential Regulation Authority in Australia. Westpac is authorised in the United Kingdom by the Prudential Regulation Authority. Westpac is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

This communication is being made only to and is directed at (a) persons who have professional experience in matters relating to investments who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this communication or any of its contents. The investments to which this communication relates are only available to and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be engaged in only with, relevant persons.

Disclaimer continued overleaf




Disclaimer continued

Any person who is not a relevant person should not act or rely upon this communication or any of its contents. In the same way, the information contained in this communication is intended for "eligible counterparties" and "professional clients" as defined by the rules of the Financial Conduct Authority and is not intended for "retail clients". With this in mind, Westpac expressly prohibits you from passing on the information in this communication to any third party. In particular this communication and, in each case, any copies thereof may not be taken, transmitted or distributed, directly or indirectly into any restricted jurisdiction. This communication is made in compliance with the Market Abuse Regulation (Regulation(EU) 596/2014).

Investment Recommendations Disclosure

The material may contain investment recommendations, including information recommending an investment strategy. Reasonable steps have been taken to ensure that the material is presented in a clear, accurate and objective manner. Investment Recommendations for Financial Instruments covered by MAR are made in compliance with Article 20 MAR. Westpac does not apply MAR Investment Recommendation requirements to Spot Foreign Exchange which is out of scope for MAR.

Unless otherwise indicated, there are no planned updates to this Investment Recommendation at the time of publication. Westpac has no obligation to update, modify or amend this Investment Recommendation or to notify the recipients of this Investment Recommendation should any information, including opinion, forecast or estimate set out in this Investment Recommendation change or subsequently become inaccurate.

Westpac will from time to time dispose of and acquire financial instruments of companies covered in this Investment Recommendation as principal and act as a market maker or liquidity provider in such financial instruments.

Westpac does not have any proprietary positions in equity shares of issuers that are the subject of an investment recommendation.

Westpac may have provided investment banking services to the issuer in the course of the past 12 months.

Westpac does not permit any issuer to see or comment on any investment recommendation prior to its completion and distribution.

Individuals who produce investment recommendations are not permitted to undertake any transactions in any financial instruments or derivatives in relation to the issuers covered by the investment recommendations they produce.

Westpac has implemented policies and procedures, which are designed to ensure conflicts of interests are managed consistently and appropriately, and to treat clients fairly.

The following arrangements have been adopted for the avoidance and prevention of conflicts in interests associated with the provision of investment recommendations.

  1. Chinese Wall/Cell arrangements;
  1. physical separation of various Business/Support Units; III. Strict and well defined wall/cell crossing procedures; IV. a "need to know" policy;

V. documented and well defined procedures for dealing with conflicts of interest;

VI. reasonable steps by Compliance to ensure that the Chinese Wall/Cell arrangements remain effective and that such arrangements are adequately monitored.

U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission ("CFTC") as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets, LLC ('WCM'), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 ('the Exchange Act') and member of the Financial Industry Regulatory Authority ('FINRA'). This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. All disclaimers set out with respect to Westpac apply equally to WCM.

Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.

The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.



© Copyright 2021 Westpac Banking Corporation

Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 ('Westpac').


Westpac Banking Corporation published this content on 13 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 October 2021 23:41:01 UTC.

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