SYDNEY (Reuters) – Australian consumer sentiment turned sour after a surprise interest rate hike this month, a survey showed on Tuesday, with shoppers worried about prospects of unemployment amid warnings of more rate increases to come.
The Westpac-Melbourne Institute index of consumer sentiment rose 0.2% in June to 79.2, steadying near levels seen in prior recessions, and suggesting pessimists greatly outnumbered optimists.
But the slight improvement masked a significant difference in sentiment readings before and after the Reserve Bank Australia’s decision to hike by another quarter-point on June 6, with the confidence reading coming in at 72.6 after the hike, versus 89.0 before.
“While the full survey showed little net change in sentiment, responses within the survey week show a big rate rise impact,” Westpac Chief Economist Bill Evans said.
“Of most concern is confidence around jobs – which has been the single bright spot in otherwise bleak consumer surveys over the last year. This now looks to be fading fast.”
The Westpac measure of unemployment expectations rose 6.6% to 131.3 in June, reflecting more consumers expect joblessness to rise in the year ahead, and marking the first weaker-than-average read since a tightening cycle began in May 2022.
After pausing interest rates in April, the RBA surprised markets by hiking in May and again last week, bringing the total tightening to a whopping 400 basis points and warning more increases may be needed.
Markets are now pricing in a peak rate of 4.45%, implying two more hikes, and see rates staying there for the remainder of the year.
The Westpac measure of whether it was a good time to buy a major household item fell 5.7% in June, and the proportion of consumers expecting rising mortgage rates rose to 75% from 69.7%.
(Reporting by Stella Qiu; Editing by Kim Coghill and Jamie Freed)
