Australian consumer confidence dips after rate hike and rising fuel costs

Consumer confidence in Australia took a hit in October, dropping 4.7% following the Reserve Bank of Australia's latest interest rate hike and surging petrol prices. Chief Economist Ivan Colhoun of CreditorWatch noted that the steepest declines were in assessments of family finances, reflecting the strain on household budgets from higher living costs and tighter monetary policy.

The data, collected after the September rate increase, showed weaker sentiment compared to responses gathered before the hike. Colhoun highlighted that cost-of-living pressures are also affecting businesses, with a recent CreditorWatch survey indicating that living costs and rising operating expenses are major concerns for business outlooks.

The labour market presented a mixed picture. The unemployment expectations index rose 1.9% in October, up 11.4% from a year earlier, aligning with a gradual increase in Australia's unemployment rate. However, Colhoun cautioned that employment growth has continued, and job-loss fears are more pronounced in sectors like construction, hospitality, and transport. Surprisingly, job ad listings on ANZ-Indeed rose 2.2% in September, following a 2.6% increase in August, a trend Colhoun described as unexpected given the weaker sentiment and tighter monetary policy.

Regarding monetary policy, Colhoun does not anticipate the current settings will be enough to bring inflation back to target by late 2027. He noted that the Reserve Bank is more focused on sustained trends rather than single monthly movements in consumer confidence. The central bank's gradual tightening path suggests the next rate move might not occur until February.