Australian consumer confidence weakened sharply in September, with households becoming more concerned about their finances and the broader economic outlook. The Westpac-Melbourne Institute consumer sentiment index fell 5.2% to 84.4, reversing most of the previous month's 6% increase. The index remained nearly 12% below its level a year earlier, with pessimists continuing to outnumber optimists.

Higher interest rates and fuel prices were key factors behind the decline. July data showing core inflation above expectations raised concerns that the Reserve Bank of Australia could deliver a fourth rate increase this year. At the same time, rising petrol prices added to pressure on household budgets. Westpac economist Matthew Hassan said continued weakness in the housing market may have further increased financial concerns.

The survey's measure of family finances dropped 9.2% in September, while assessments of the economic outlook also deteriorated significantly. Australians also became less convinced that it was a good time to purchase major household items. The results suggest that higher borrowing and living costs are affecting both current household finances and confidence in future economic conditions.

Concerns over falling home values were particularly strong among mortgage holders. Their sentiment plunged 13% during the month, compared with a 0.6% decline among renters. With inflation, interest rates and housing conditions still under scrutiny, Australian households appear increasingly cautious about both the economy and their own financial outlook.