Australian Consumer Confidence Plunges to 1990s Lows Following Central Bank Rate Hike

Australian consumer sentiment has tumbled to its most pessimistic sustained levels since the early-1990s recession following the Reserve Bank of Australia's latest interest rate hike. According to the Westpac–Melbourne Institute consumer sentiment index, overall confidence plunged by 4.7% to 80.4 points in October. However, for respondents surveyed directly after the central bank lifted benchmark borrowing costs to their highest levels since 2011, the index collapsed to 67.2 points, closely mirroring the ANZ-Roy Morgan weekly survey, which recorded 67.1 points.

Westpac head of Australian macro-forecasting Matthew Hassan noted that households remain trapped in an enduring cost-of-living crisis. Hassan stated that the RBA's monetary tightening had badly rattled consumers, triggering an acute deterioration across household balance sheets. Measures evaluating family finances and buyer sentiment absorbed the sharpest hits, while five-year economic outlook assessments sank to levels not recorded since the severe pandemic restrictions of August 2020.

Compounding the central bank's tightening cycle, surging energy costs continue to exert severe pressure on domestic budgets. AMP economist My Bui explained that the typical Australian household now faces an estimated $20 weekly increase in petrol bills compared to the start of the year. Bui warned that persistent sentiment deficits strongly correlate with declining per capita consumption, indicating domestic consumer spending will likely contract further over the remainder of the year.

The divergence across housing demographics showed mortgage holders registering a depressed 77 index points amid climbing debt servicing costs, while outright owners saw the steepest drop amid a six-month property market slump. Hassan highlighted that unemployment concerns climbed by 1.9%, although Citi analysts Josh Williamson and Faraz Syed observed that job vacancies rose to a two-year high of 122 points, signaling continued resilience in overall employment growth despite broader consumer retrenchment.