Australian consumer sentiment has collapsed back to crisis-era levels as fuel prices and rising interest rates bite. but the RBA is still expected to press ahead with rate hikes as inflation remains the dominant concern.
Westpac Consumer Sentiment plunged -12.5% mom from 91.5 to 80.1 in April, marking the biggest monthly decline since the onset of the COVID pandemic. The index is now hovering near historical lows, underscoring the sharp deterioration in confidence.
The details point to a broad-based weakening in outlook. Near-term expectations have dropped back to levels last seen during the 2022–23 cost-of-living crisis. Job loss fears surged to a 5½-year high, or a 10-year high excluding the pandemic period. According to Westpac, the combination of spiking fuel prices and higher borrowing costs is weighing heavily on real incomes, suggesting another phase of declining per capita consumption.
Yet, weaker sentiment is unlikely to alter the monetary policy path. Inflation remains above target, and the full impact of higher energy costs has yet to be reflected in the data. Westpac expects the RBA to deliver a 25bps rate hike in May, followed by further tightening in the second half of the year, reinforcing the tension between slowing growth and persistent inflation pressures.
