Australian Consumer Confidence Plummets to 30-Year Low After Rate Hike

Consumer confidence in Australia has hit its lowest point in decades, driven by soaring interest rates and rising living costs. The Westpac, Melbourne Institute Consumer Sentiment Index dropped 4.7% to 80.4 in October, its worst reading since the early 1990s. The sentiment plummeted even further, by nearly 20%, among the 40% of respondents surveyed after the Reserve Bank of Australia (RBA) raised interest rates, landing at 67.2, the weakest figure of the century.

The decline was widespread, with pessimists outnumbering optimists in nearly all consumer groups tracked by Westpac. Despite four rate hikes this year, consumers expect mortgage rates to rise beyond the current 4.6%. The Mortgage Rate Expectations Index climbed 5.5% to 179.7 in October, with over 80% of post-RBA decision respondents anticipating further rate increases within the next year.

Housing sentiment showed rare improvement, with the index measuring whether it is a good time to buy a dwelling rising 3.4% to 88.4. However, this remains 8.3% below its level a year ago. House price expectations also increased by 4.3% to 115.1, though still 33.1% lower than last year. Matthew Hassan, head of Australian macro-forecasting at Westpac, noted that improvements following an interest rate hike are unusual but not unheard of, particularly when sentiment is already weak.

Household finances took a significant hit, with the index measuring family finances compared with a year ago falling 8% to 66.9, matching April’s low. Expectations for household finances over the next 12 months also fell 6.4% to 88.4, placing the measure in the bottom 10% of results recorded since the survey began. Hassan described the situation as a 'cost-of-living nightmare' with consumers primarily concerned about rising living costs and high interest rates rather than job or insolvency problems.