Australia Westpac Consumer Sentiment Index rose marginally by 0.2% to 79.2 in June. Nevertheless, the index continues to hover around “recession lows” over the past year, similar to figures recorded during the “deep recessions” of late 1980s/early 1990s.
Significantly, responses gathered within the survey period (June 5-9) reflected the considerable impact of RBA’s unexpected rate hike on June 6. Confidence had seen a substantial surge from 79.0 in May to 89.0 prior to the rate hike announcement. However, it experienced a sharp decline post-announcement, plummeting to a severely low level of 72.6.
Westpac pointed out that inflation continues to be the “dominant drag” on consumer confidence, overshadowing even the effects of higher interest rate Nevertheless,confidence in labor market turned as one consistent positive.
In light of the upcoming RBA meeting on July 4, Westpac forecasts another 25 basis point rate hike, taking the rate to 4.35%. It noted, “Given that little further information will be available on expectations and unit labour costs in the near term it seems logical that delaying the tightening for another month, to assess more data, seems unnecessary”.