The recent increase in Australian interest rates has led to concerns among consumers about their household finances and the rising cost of living. As a result, consumer sentiment has sharply declined in November, reaching deeply pessimistic levels.
The Westpac-Melbourne Institute Index of consumer sentiment dropped by 2.6% to 79.9 in November, down from 82 in October. This decline is due to the Reserve Bank of Australia’s decision to raise the official cash rate to 4.35% from 4.10%, which has negatively impacted confidence levels.
According to Westpac senior economist Matthew Hassan, this rate hike has put additional pressure on family finances and reignited worries about the increasing cost of living and the possibility of future rate increases. Although there had been some hopeful signs in recent months that sentiment was improving after a prolonged period of pessimism since last year, this latest rate hike has dampened those expectations.
Consumers remain cautious about the likelihood of further rate hikes. The survey conducted after the RBA’s decision revealed that 73% of respondents expect mortgage interest rates to continue rising over the next 12 months. This percentage has increased from 63% last month and 48% in September, reaching similar levels seen earlier this year.
In contrast, only 4% of consumers surveyed expect rates to be cut within the next year, a significant decrease from the 15% recorded in September.
With consumer sentiment at its lowest point, Australian households are bracing themselves for potentially more challenging financial situations ahead.