Australian consumer sentiment falls more than expected as rate, fuel costs bite

Australian consumer confidence plunged more than expected, according to data released by Westpac on Tuesday. The Westpac-Melbourne Institute Consumer Sentiment Index fell by 4.7% to 80.4 in September, down from 84.4 in the previous month. This was significantly worse than the forecasted decline of 1.2%, which would have brought the index to about 83.4. The 80.4 score marked one of the weakest readings since the survey began in the early 1970s.

One major contributor to the decline was the Reserve Bank of Australia's decision to raise interest rates to 4.6%, the highest level since 2011. Prior to the rate hike, 60% of surveyed households had a positive outlook, with a sentiment score of 86.9. However, this confidence plummeted to 67.2 among those surveyed after the announcement, a nearly 20% drop that was the largest since Westpac started daily survey tracking in 2019.

Fuel prices have also exacerbated the situation, with average weekly petrol prices surpassing A$2.30 a litre, a 25% increase from the beginning of the year. On top of this, the standard variable mortgage rate is projected to exceed 9%, based on Westpac's projections. In the survey, pessimists outnumbered optimists in 102 out of 106 consumer groups tracked.

Moreover, over 80% of respondents expect mortgage rates to rise within the next year, and growing concern about the job market has further strained household finances, indicating that the financial pressures are not limited to inflation and borrowing costs.