Australia’s Westpac Consumer Sentiment index dropped by -1.1% mom to 82.7 in July, reflecting increased concerns about persistent inflation and fears of interest rate hikes.
The Mortgage Rate Expectations Index, which measures consumer expectations for variable mortgage rates over the next 12 months, surged by 12.8% in July, marking the steepest monthly rise since early 2022. Over the past three months, the index has climbed by 30%, from a below-average 122.8 in April to 159.2 in July, well above historical average of 143.8. This marked increase is the sharpest observed in the past seven years, with detailed responses indicating that nearly 60% of consumers expect mortgage rates to rise over the next year.
RBA will meet on August 5–6. Westpac expects the RBA to hold interest rates steady, contingent on inflation continuing to decline as anticipated. The upcoming Q2 CPI and labor market data will be critical.
