(Bloomberg) -- Australia’s consumer confidence picked up in March as inflation pressures eased and the Reserve Bank reduced interest rates for the first time in four years.

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Sentiment jumped 4% to 95.9 points, the highest level in three years, a Westpac Banking Corp. survey showed Tuesday. While improving, the result still means pessimists outweigh optimists with the dividing line at 100.

“The RBA’s decision to cut interest rates in February and a further easing in cost-of-living pressures have provided a clear lift,” Matthew Hassan, Westpac’s head of Australian macro forecasting, said in a statement. “The survey detail shows a broad-based improvement with a notable rise in confidence around the labor market outlook.”

Australia’s job market has shown surprising resilience through a period of elevated rates with unemployment at a historically low 4.1%. The RBA on Feb. 18 cut borrowing costs by a quarter-percentage point as the board gained confidence inflation is on track to return sustainably to target. 

“Despite the improvement, there are still some signs of unease, particularly around developments abroad,” Hassan said, reflecting newsflow over the Trump administration’s tariff plans and treatment of allies. “Responses in March show that while consumers detected a marked improvement in the domestic news-flow, the news from abroad has become more troubling.”

Yet even at home, the central bank last month cautioned over the prospect of further rate cuts as the tight labor market raises the risk of resurgent price pressures. Meantime, data last week showed the economy strengthened in the final three months of 2024 as consumption improved from weak levels.

Whether the upswing in household sending proves sustainable is likely to be an important input in future rate decisions. The RBA next meets on March 31-April 1.

Prior to that, the government is due to hand down a budget on March 25.

Other key data points:

• The economic outlook, next 12 months sub-index rose 3.6% to 96
• Expectations showed a strong improvement among consumers with a mortgage, the sub-index for this sub-group jumping 11.4% of 117.6
• Westpac highlighted the shock from the post-pandemic surge in inflation and loss of purchasing power is now beginning to dissipate with the time to buy a major household item sub-index rising a further 6.9% in March to 97.1
• Households are becoming more positive on the labor market, suggesting a “soft landing” has already been achieved. The Westpac–Melbourne Institute Unemployment Expectations Index dropped 6.3% to 117.9 in March — a lower reading means more consumers expect unemployment to fall over the year ahead

Hassan reiterated that Westpac expects the RBA to stand pat an its next meeting.

Any cuts from now on will “depend on the flow of data, especially for inflation, the labor market and domestic demand,” he said. 

“The board will be mindful that inflation has recently declined by more than the RBA had expected and it will be wary of negative economic and financial developments overseas,” he added. “Westpac expects a further slowing in inflation will give the RBA sufficient confidence to deliver more rate cuts this year with the next move coming at the May meeting.”

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