Key facts
- Australian consumer confidence has hit its lowest point since the early 1990s recession.
- The Westpac–Melbourne Institute consumer sentiment index dropped to 80.4% in October.
- After the RBA rate hike on September 29, the index fell to 67.2% for surveyed respondents.
- The ANZ-Roy Morgan consumer survey showed a similar decline, falling to 67.1 points.
- Matthew Hassan, Westpac's head of Australian macro-forecasting, noted the longest period of sustained pessimism since the early 1990s recession.
- Rising fuel prices have increased the weekly petrol bill for a typical Australian household by $20 this year, according to AMP economist My Bui.
Australian consumer confidence has plummeted to its lowest level since the early 1990s recession, driven by a series of interest rate hikes by the Reserve Bank of Australia. The Westpac–Melbourne Institute consumer sentiment index fell to 80.4% in October, but for those surveyed after the RBA's latest rate increase on September 29, the index dropped to a stark 67.2%.
This marks the most persistently pessimistic period for Australian households since the "disastrous" recession of the early 1990s, according to Matthew Hassan, Westpac's head of Australian macro-forecasting. He stated that consumers are enduring a prolonged cost-of-living crisis, with the RBA's recent move significantly unsettling them. The sharpest deterioration in sentiment was observed after the rate decision was announced during the survey week.
Assessments of family finances and buyer sentiment were the most heavily impacted categories. While expectations about the broader economic outlook declined less severely, views on the economy over the next five years have returned to lows not seen since August 2020. AMP economist My Bui attributed the decline to the September rate hike and escalating fuel prices, noting that a typical household's weekly petrol bill has increased by $20 this year.
Declining confidence often correlates with a fall in household spending per capita. Bui's analysis suggests that the downtrend in confidence over the past 12 months points to further contraction in per capita consumption this year. Mortgage holders expressed the most pessimism, with their sentiment index at 77 points due to rising borrowing costs. Those who own their homes outright saw the largest monthly decline in sentiment as the housing market downturn continued for a sixth month. Renters remained the most optimistic group, with their sentiment unchanged at 84.8 points.
Concerns about job losses are also rising, with unemployment expectations increasing by 1.9%. However, the labor market shows signs of resilience, with Citi analysts Josh Williamson and Faraz Syed reporting that job vacancies have reached a two-year high of 122 points, aligning with businesses' expectations of positive employment growth.