Confidence Plummets After RBA Rate Hike
Australian households have not been this consistently downbeat since the recession of the early 1990s, after a fourth rate increase this year. The Westpac-Melbourne Institute consumer sentiment index fell 4.7% to 80.4 in October, its weakest reading since the Middle East conflict began in early April. Among those questioned after the Reserve Bank of Australia's 29 September decision, the index sank to 67.2, the lowest since the late 1990s. The weekly ANZ-Roy Morgan survey echoed this, dropping roughly 5% to 67.1 points.[S1][S2][S3][S4][S5]
Matthew Hassan, Westpac's head of Australian macro-forecasting, said sentiment has stayed exceptionally weak for the longest stretch since the early 1990s recession, which he called disastrous. He said Australian consumers are trapped in a cost-of-living nightmare with no apparent end. The most recent RBA action seems to have shaken consumers badly, with a steep decline once the decision was made public. Family finance and buyer sentiment took the biggest hits. Economic outlook expectations fell less, but five-year views returned to lows last seen in August 2020, soon after Melbourne's second lockdown and before jobkeeper was widened.[S1]
Mortgage Holders and Homeowners Hit Hardest
Mortgage holders formed the gloomiest home ownership group amid climbing borrowing costs, with an index reading of 77 points. Outright homeowners recorded the month's steepest sentiment drop as the housing downturn ran into a sixth month. Renters stayed the most upbeat, flat at 84.8 points. AMP economist My Bui called the fall unsurprising given the September rate hike and higher fuel prices. Her calculation puts the weekly petrol cost for a typical Australian household $20 above the start of the year. Bui cautioned that weaker confidence usually tracks per capita household spending, implying consumption per person will likely contract further this year.[S1]
Hassan noted that worries about losing work are mounting, with unemployment expectations rising 1.9%. Even so, there remain indications the labour market is resilient. Citi analysts Josh Williamson and Faraz Syed pointed out that job vacancies have climbed to a two-year peak of 122 points, consistent with business sentiment expectations for positive employment growth.[S1]
