Australian Consumer Confidence Hits 1990s Low After RBA Rate Hike

Australian consumer confidence has hit its lowest level since the early 1990s recession, following the Reserve Bank of Australia's (RBA) fourth interest rate hike this year. The Westpac, Melbourne Institute consumer sentiment index dropped by 4.7% to 80.4 in October, marking the worst reading since the start of the Middle East conflict in April. The decline was even steeper for those surveyed after the RBA's rate increase on 29 September, with the index plunging to 67.2.

The survey, conducted between 28 September and 1 October, revealed that assessments of family finances and buyer sentiment were the most affected. Expectations about the economy over the next five years also dropped to levels not seen since August 2020, shortly after Melbourne's second lockdown. AMP economist My Bui noted that rising fuel prices, with the average household petrol bill increasing by $20 since the start of the year, contributed to the decline.

Mortgage holders were the most pessimistic subgroup, with sentiment at 77 index points, while renters remained the most optimistic, unchanged at 84.8 points. Westpac’s head of Australian macro-forecasting, Matthew Hassan, described the sentiment as extremely weak for the longest period since the early 1990s recession, highlighting that consumers are stuck in a cost-of-living crisis. He also noted that fears of job losses are rising, with unemployment expectations ticking up 1.9% higher.

Despite the gloomy outlook, there are signs of resilience in the labor market. Citi analysts Josh Williamson and Faraz Syed reported that job vacancies have increased to a two-year high of 122 points, suggesting positive employment growth expectations among businesses.