Australia consumer sentiment slumps 5.2% in September - Westpac

Australian consumer sentiment plunged 5.2% in September, according to the Westpac-Melbourne Institute Consumer Sentiment Index. Higher fuel prices and concerns over potential interest rate hikes dampened household finances, pushing sentiment toward deeply pessimistic levels. Rising pump prices and expectations of higher borrowing costs were the main factors behind the decline.

Local fuel prices had risen above A$2 per litre for the first time since April, climbing 6.7% since the August survey as the temporary fuel excise cut expired and global energy prices increased. Inflation data released in July had also reignited fears of another interest rate hike from the Reserve Bank of Australia. The decline in sentiment was widespread, with the index tracking family finances compared to a year ago falling 9.2% to 72.6.

Homeowners' sentiment dropped 13%, while renters' sentiment only rose 0.6%. Among mortgage holders, concerns about rising mortgage rates were particularly pronounced, with 64% expecting rates to increase over the next year, up from 59% in August. Housing sentiment weakened significantly, with the "time to buy a dwelling" index falling 10.7% to 85.5.

Despite the housing downturn, consumers remained uncertain about future property prices. Additionally, job-loss fears rose sharply among workers in construction and hospitality. The next RBA Monetary Policy Board meeting, which could signal the bank's response to the sentiment decline, is scheduled for September 28-29. Westpac noted that the deteriorating sentiment could lead to subdued household demand, but expected the RBA to be cautious in responding to a single monthly inflation reading.