Consumer confidence drops by 3.8pts as RBA raises interest rates again: ANZ-Roy Morgan

The RBA’s decision to hike interest rates again for a fourth consecutive month has seen the ANZ-Roy Morgan Consumer Confidence Index fall 3.8pts down to 80.3.

Steep inflation expectations in conjunction with yet another hike in cash rates has resulted in slumped consumer confidence across the country.

Consumer confidence declined 4.5% last week, to its lowest levels since April 2020, as the RBA increased interest rates by 50bp for the third month in a row to 1.85%. Household inflation expectations increased 0.1ppt to 5.6% despite petrol prices falling for a fourth consecutive week.

Consumer confidence was down across all five mainland states this week, with the largest falls in NSW, South Australia and Western Australia.

This week’s fall was driven by increasing concern about the next 12 months both in terms of personal finances and the performance of the Australian economy over the next year.

Despite the official unemployment rate in June 2022 falling to 3.5% – the lowest rate seen in almost 50 years, 48% of Australian consumers say now is a ‘bad time to buy’ a major household item.

Approximately 60% of economic growth depends on growing consumer spending – and despite many Australians struggling through skyrocketing costs of living, household spending in June is up more than 10% compared to this time last year.

Recent ABS statistics reveal that in June, discretionary spending rose by 10.8%, driven by spending on recreation and cultural activities, while non-discretionary spending on essentials rose 9.8%, due to the rising cost of transport.

ANZ head of Australian economics, David Plank, said: “Demand for housing has been dropping, along with house prices. That and rising interest rates caused confidence among homeowners to drop 7% last week. So far in 2022, household spending has been robust despite very weak consumer sentiment, with strong employment gains, high levels of household saving and a desire to travel more than offsetting concerns about the rising cost of living.

“It remains to be seen whether this divergence between confidence and spending can continue. Certainly, we expect employment to remain robust through 2022 and wages growth to pick up. This may be enough to keep households spending, even if they feel wary about the outlook.”

Research by Roy Morgan also reveals large increases in inflation expectations are seen across the board since the measure hit record lows in mid-2020 during Victoria’s second COVID wave.

Inflation expectations in July are a large 1.8% points higher than a year ago in July 2021, and 2.5% points above the near record low of 3.4% in July 2020.

Expectations were highest in Tasmania in July at 7%, significantly higher than any other state. Following TAS was NSW at 6.3% – also well above the national average.

Roy Morgan CEO Michele Levine said: “A look at Inflation Expectations by Socio-Economic Quintile reveals that those in the lowest quintile are doing it toughest. Australians in the bottom ‘FG Quintile’ expect inflation of 6.2% annually over the next two years – almost 1% point higher than those in the highest ‘AB Quintile’ who expect inflation of 5.3% over the same period.

“One positive that is worth mentioning is that on a weekly basis Inflation Expectations peaked at 6% in the fourth weekend of July and have since declined modestly in the last two weeks. However, the Federal Government’s commitment to restoring the petrol price excise to its full amount at the end of September will again put very visible upward pressure on transport prices.”

In the longer term, just 14% (up 2ppts) of Australians are expecting ‘good times’ for the economy over the next five years compared to 22% (up 4ppts) expecting ‘bad times’.


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