Australia’s consumer confidence slipped further into “deeply pessimistic” territory as elevated inflation combined with high interest rates intensifies cost-of-living pressures.
Sentiment dipped 0.4% to 81 points, meaning pessimists exceed optimists with a reading of 100 the dividing line, a Westpac Banking Corp. survey showed Tuesday. The index has steadily held in a 78-86 range over the past year.
Westpac’s senior economist Matthew Hassan pointed to “continued pressures on family finances and concerns about the interest rate and economic outlook” among key drags on sentiment. The poll was conducted July 31-Aug. 4, spanning the Reserve Bank’s Aug. 1 meeting when it left the cash rate unchanged at 4.1% for a second straight month.
“The August survey detail pointed to little or no impact from the RBA’s decision to pause,” Hassan added.
Assessments of “family finances compared to a year ago” rose 3.4% to 64.3, remaining at an “extremely weak level overall,” Hassan said. The “family finances next 12 months” sub-index edged 0.2% higher to 89.9.
A gauge of the outlook for household spending, “the time to buy a major household item” sub-index inched up 0.3%, again holding at historically low levels at 79 points, the report showed.
Consumer views on housing showed a “further widening between bullish price expectations and deteriorating buyer sentiment,” Hassan said.
The report showed the “time to buy a dwelling” index fell 5.7% to 72.1 in August driven by a combination of high interest rates and strong price increases. At the same time, the “House Price Expectations Index” climbed a further 1.3% to 151.2, a new cycle high.
Hassan expects the RBA will now be on an extended pause, holding the cash rate unchanged at 4.1%.
“Consumers may not be convinced but we have very likely reached the peak in the interest rate tightening cycle,” he said.
