The growth in consumer confidence over the last few weeks have shattered as the RBA increases interest for the fourth straight month.
Confidence across Australia has dropped 3.8 points to 80.3, which is a significant 11.6 points below the 2022 weekly average of 91.9. Levels have now reached their lowest levels since April 2020.
Moreover, there is an 18.3-point difference in consumer confidence levels between 2021 and 2022.
Confidence levels were slowly lifting back up over the last few weeks but shattered once again as the RBA increased interest rates for the fourth straight month. The RBA increased the official cash rate by .50 percent to 1.85 percent, which has since increased by 1.75 percent since May. This is the fastest increase rate sine 1994.
“Consumer confidence declined 4.5 percent 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 percent,” said David Plank, the ANZ Head of Australian Economics. “Household inflation expectations increased 0.1ppt to 5.6 percent despite petrol prices falling for a fourth consecutive week. Demand for housing has been dropping, along with house prices. That and rising interest rates caused confidence among homeowners to drop seven percent last week.”
There has been no change in the percentage of Australians who say that now is a good time to buy major household items (23 percent). However, there has been a three percentage point increase for those saying that now is a bad time to buy.
“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,” Plank explained.
“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.”
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