SYDNEY – A measure of Australian consumer sentiment sank in November as rising interest rates and surging inflation clouded the outlook for family finances and the economy, though actual spending has yet to follow.
The Westpac-Melbourne Institute index of consumer sentiment released on Tuesday slid 6.9 percent in November from October, to be down almost 26 percent on a year earlier. The index reading of 78.0 meant pessimists greatly outnumbered optimists and back to lows not seen since the start of the pandemic.
“Prior to that, we need to go back to the deep recession in the early 1990s to find a weaker read,” said Westpac chief economist Bill Evans.
“Interest rate rises were a clear factor weighing on confidence in the month,” said Evans.
The Reserve Bank of Australia (RBA) raised rates a quarter point to a nine-year high of 2.85 percent early in November and Evans noted that survey results taken after the hike showed a very sharp fall.
The result was echoed by a separate weekly survey from ANZ which showed a drop of 1.5 percent in its sentiment index last week and a rise in inflation expectations to 6.8 percent, the highest since the report began in 2010.
The surge in inflation has led RBA to hike rates by a blistering 275 basis points since May.
Yet ANZ also reported that customer spending held up well in the first week of November, with strength in Queensland and Western Australia pointing to the return of tourism.
Westpac’s measure of the economic outlook for the next 12 months slid 7 percent in November, while the outlook for the next five years dived 7.3 percent.
Measures of family finances compared with a year ago fell 3.4 percent, while outlook for finances over the next 12 months tumbled 11.2 percent likely impacted by reports electricity prices could rise more than 50 percent over the coming year.
Westpac’s measure of whether it was a good time to buy a major household item fell 4.3 percent, to be down 27.3 percent on a year earlier.