Australian Consumer Sentiment Hits Recession Lows After RBA Rate Hike

Australian consumer sentiment has plummeted to recession-era lows following the Reserve Bank of Australia's (RBA) latest interest rate hike. The Westpac-Melbourne Institute Consumer Sentiment Index dropped 4.7% to 80.4 in October, with sentiment among those surveyed after the RBA decision falling even further to 67.2, a level not seen since the early 1990s recession. The cash rate now stands at 4.6%, the highest since 2011, and petrol prices have climbed back above $2.30 a litre, adding to the financial strain on households.

Despite the sharp decline in consumer confidence, Westpac anticipates another rate hike by the RBA at its November 2-3 meeting. The bank cites rising fuel costs, which are beginning to impact broader prices, and demand pressures from the AI and data centre investment boom as key factors. Over 80% of respondents surveyed after the RBA decision expect mortgage rates to rise further over the next year, up from 63% in September.

The survey reveals that pessimists outnumber optimists in 102 of the 106 population groups tracked, marking the worst stretch of persistently weak sentiment since the early 1990s recession. Westpac described consumers as 'on edge rather than alarmed,' noting that concerns center primarily on the cost of living and interest rates rather than job losses or insolvencies. The risk for markets is that the central bank's rate-hiking cycle may exacerbate a household sector already at recession-level gloom, potentially leading to a sharper slowdown in consumer spending into 2027.