Australian Consumer Confidence Hits Decades-Low Amid Rate Hike Fallout

Australian consumer confidence has taken a dramatic hit for the second consecutive month, according to the latest survey data. The Consumer Confidence Index for October, released by Westpac Banking Corp and the Melbourne Institute, dropped 4.7% to 80.4, well below the anticipated 1.2% decline. This sharp fall follows a 5.2% decrease in September, marking the lowest sentiment levels in decades. The index is nearly 13% lower than it was a year ago, with only four of 106 consumer subgroups showing more optimism than pessimism.

The survey period coincided with the Reserve Bank of Australia's (RBA) fourth interest rate hike this year, pushing the policy rate to 4.60%, the highest since 2011. Responses collected before the rate hike showed a confidence level of 86.9, while those after plummeted to 67.2, a gap of nearly 20 points. This is the widest disparity since Westpac began tracking daily responses in 2019.

Household finances are feeling the pinch, with assessments of current financial conditions dropping 8.0% and future expectations falling 6.4%. The gauge measuring whether now is a good time to buy major household items also fell 7.1%. Rising gasoline prices, averaging over A$2.30 per liter, up nearly 25% since January, are adding to financial pressures. Westpac anticipates standard variable mortgage rates could soon exceed 9%.

The survey revealed widespread anxiety about mortgage rates and employment prospects. Over 80% of respondents expect mortgage rates to rise in the next year, while concerns about job security are growing. The RBA's focus on curbing inflation through rate hikes is intensifying the financial strain on mortgage-holding households. If consumer sentiment continues to weaken, it could lead to reduced spending and broader economic challenges.