SYDNEY – A measure of Australian consumer sentiment slid for an eighth straight month to match pandemic lows in July as the surging cost of living and rising interest rates darkened the national mood.
The Westpac-Melbourne Institute index of consumer sentiment released on Tuesday slid 3.0% in July from June, when it dropped 4.5%. The index was down 23% from July last year at 83.8, meaning pessimists far outnumbered optimists.
Westpac chief economist Bill Evans noted sentiment had now tumbled almost 20% since December, the sort of extended slide usually associated with global shocks or recessions.
A separate weekly survey from ANZ showed a drop of 2.5% in its confidence index as consumers feared inflation could hit 6% in the months ahead. Figures for the June quarter due later this month are likely to show inflation is already around 6%.
The gloom partly reflected the Reserve Bank of Australia’s (RBA) decision last week to raise interest rates by another 50 basis points to 1.35%, warning that more would be needed to restrain runaway inflation.
Analysts at ANZ noted that confidence among mortgage holders has fallen 25% since April, while confidence for renters was down just 4%.
“The cash rate has increased at a faster pace than we have seen in any cycle since 1994 and this is clearly unsettling for consumers also facing a sharp rise in the cost of living,” said Westpac’s Evans.
The rise in borrowing costs adds to pressures from higher petrol prices, housing and food, and saw Westpac’s measure of family finances compared with a year ago fall 2.8%.
The outlook for finances over the next 12 months did edge up 0.1%, but that followed a 7.6% dive in June and a measure of whether it was a good time to buy a major household item slipped 0.9%.
The measure of the economic outlook for the next 12 months dropped 4.2%, while the outlook for the next five years fell 6.7%.
(Reporting by Wayne Cole; Editing by Sam Holmes)