The RBA last week chose to hold the official cash rate (OCR) at 4.10% for the second consecutive month.
It also flagged that the OCR would remain on hold unless macroeconomic data surprises on the upside.
Despite the “good” news, Westpac’s latest consumer sentiment survey, released on Tuesday, noted that sentiment for respondents surveyed after the RBA meeting was 4.9% lower than those surveyed before the decision:
This is the second consecutive month that this has occurred despite rates being on hold.
Further, sentiment for mortgage holders fell by 7.2% to 73.8 with the sub-group remaining weaker than renters and outright property owners:
Westpac notes that “the lacklustre response may be partly due to the RBA’s continued warnings that further tightening may still be required”.
“Most consumers are still bracing for further rate rises with over two thirds of those surveyed after the RBA decision expecting rates to move higher over the year ahead, nearly half of this group expecting a rise of over 1ppt”.
CBA also notes that “the fixed rate roll off is also now in full swing. As such, mortgage holders who have recently moved to or are about to transition to a variable rate will be experiencing a large cash flow impact despite the pause, possibly denting sentiment”.
“The broader theme of cost of living pressure, especially recent energy and fuel prices rises are also likely putting downward pressure on sentiment”.
ANZ-Roy Morgan’s weekly consumer confidence survey also shows that mortgage holders remain deeply depressed, “as restrictive interest rates squeeze cashflows of indebted households”:
Interestingly, Westpac’s survey shows that Australians are becoming increasingly bullish on house prices, despite buyer sentiment falling.
Expectations for house prices rose another 1.3% to 151.2, which is a new cycle high.
Expectations are particularly bullish in NSW (155.2) and South Australia (+160.8) but less so in Victoria (+147.7) and Queensland (149.9).
However, the ‘time to buy a dwelling’ index fell 5.7% to 72.1 in August, reversing all of the previous month’s gain and remaining near extreme historical lows (the long run average is 121).
Westpac notes that the “combination of high interest rates and high prices remains deeply discouraging for buyers”.
