Last week’s 25 bp interest rate hike from the Reserve Bank has dealt a hammer blow to consumer sentiment.
Westpac’s monthly consumer sentiment survey fell 4.7% to 80.4, with responses during the survey week showing a “very sharp pull-back after the RBA rate hike”.
“The sentiment read across the 40% surveyed after the RBA decision came in at just 67.2, an alarmingly weak read that, for complete surveys, has only been registered during the depths of the early 1990s recession”, Westpac senior economist Matthew Hassan wrote.
“The nearly 20% drop between pre and post RBA samples is also the largest seen since we started tracking daily responses in 2019”.
The component detail shows the October sentiment fall was broad-based but with a larger pull-back in assessments of family finances and buyer sentiment.
Household finances are under intense pressure from higher fuel costs and interest rates, with over 80% of consumers expecting mortgage rates to rise over the next year.
Consumers are also reporting growing unease about the job outlook.
“Australian consumers remain stuck in a cost-of-living nightmare that seems to have no end in sight”, Hassan wrote.
ANZ-Roy Morgan’s weekly survey tells a similar story:
The ANZ-Roy Morgan weekly consumer confidence survey also tumbled 3.4 points to 67.1 points – to its tenth-lowest level since 1973 following the RBA’s rate hike.
The four-week moving average has declined 1.2 points to 70.9 points.
ANZ economist Sophia Angala noted that confidence in current and future financial conditions, and in short-term economic conditions, has fallen to its lowest levels since late May, suggesting the RBA’s decision is weighing on household sentiment.
Confidence also fell across all housing cohorts, declining 2.1 points for outright homeowners and 2.6 points for mortgage holders. Renters recorded the largest fall at 6.1 points, though they remain the most confident cohort.
The following charts are from Alex Joiner at IMF Investors and plot both consumer sentiment/confidence measures side by side:
Clearly, the Australian consumer has been left reeling following the RBA’s latest interest rate tightening.
