The Westpac-Melbourne Institute Consumer Sentiment Index fell 4.7% to 80.4 in October after the Reserve Bank of Australia lifted rates to 4.60%, the highest level since 2011, The Guardian reported. Among respondents surveyed after the RBA decision on 29 September, the index plunged to 67.2, compared with 86.9 among those surveyed before the rate announcement.
The September reading for the index was 84.4, and the October result missed a forecast decline of 1.2% that would have placed the index at around 83.4. The survey ran from 28 September through to 1 October.
The nearly 20 percentage point spread between pre- and post-RBA respondents set a record for daily-tracked surveys, which Westpac has run since 2019. A reading of 80.4 places the index among its weakest results in the survey's history, which extends back to the early 1970s.
The ANZ-Roy Morgan consumer survey fell about 5% to 67.1 points. Overall consumer confidence has fallen about 20% since the RBA began lifting rates, with the September increase marking the fourth such move during the year. Assessments of the economic outlook over the next five years dropped to levels last recorded in August 2020, shortly after Melbourne entered its second lockdown and before the JobKeeper subsidy expanded.
Within the Westpac-Melbourne Institute survey, family finance assessments and buyer sentiment showed the sharpest falls by category. Among home ownership subgroups, mortgage holders sat at the bottom with 77 index points, while outright homeowners posted the steepest month-on-month sentiment fall.
Westpac said the latest RBA rate rise appears to have sharply unsettled consumers, and noted that the divergence between pre- and post-decision respondents was the largest since it began tracking daily responses. Hassan said consumer responses over the survey week showed a sharp worsening after the RBA decision was announced. AMP economist My Bui said the fall in confidence was not surprising given the September rate increase and rising fuel costs, and that the typical Australian household's weekly petrol bill has risen by $20 compared with the start of the year.
Weekly petrol costs at the pump climbed above $2.30 a litre, a rise of close to 25% relative to the year's opening levels. Westpac has flagged that the standard variable mortgage rate looks set to exceed 9%.
Across the 106 consumer groups the survey tracks, pessimists outnumbered optimists in 102 of them. Over 80% of survey respondents anticipated mortgage rates would climb further during the coming year.
Unemployment expectations rose 1.9%, though job vacancies reached a two-year high of 122 points. Renters were the most optimistic subgroup, unchanged at 84.8 points.
AMP's Bui said declining confidence tends to move in step with household spending per person, and that the downward trend in confidence over the past 12 months points to consumption per person likely falling further into contraction. Westpac's projection puts the standard variable mortgage rate on course to cross 9%, while a typical household's weekly petrol spend has risen by $20 since the beginning of the year.
Reporting: The Guardian, Yahoo Finance
Written by Pick & Scroll News from the reporting and documents linked above.
