Australian Consumer Confidence Plummets After RBA Rate Hike

Australian consumer sentiment took another hit in October, as Westpac’s consumer sentiment index plummeted 4.7% to 80.4. The decline follows the Reserve Bank of Australia’s (RBA) decision to raise its policy rate to a 15-year high of 4.60%, with hints of further tightening ahead.

The survey, conducted by Westpac and the Melbourne Institute, reflects households' worsening outlook on their finances and the economy. Sentiment is now 13% lower than a year ago, but the timing of the survey, spanning the RBA’s rate decision, heightens the impact. Westpac economist Matthew Hassan noted a stark divide: responses collected after the rate hike showed a confidence reading of 67.2, compared to 86.9 for those taken beforehand.

The data reveals rising financial pressures, with views on family finances dropping 8.0%, future financial outlook sliding 6.4%, and the gauge for purchasing major household items falling 7.1%. Higher mortgage repayments are squeezing cash flow, prompting households to delay discretionary spending, a dynamic the RBA aims to leverage to curb inflation.

Weaker consumer confidence could have broader economic consequences, as reduced spending may impact retailers, hiring, and wage growth. The RBA closely monitors these mood readings, as a sustained slump could slow the economy without triggering a formal recession.