The Westpac Melbourne Institute index of consumer sentiment fell 3% in July, its seventh consecutive monthly fall with rate hikes and surging inflation pushing sentiment down.
Since the beginning of the survey in 1974, major disruptions to the Australian economy have been from Covid, the Global Financial Crisis, the recession in the early 1990s, a slowdown in the mid-1980s and the recession of the early 1980s.
The index has fallen 19.7% since December 2021, a precipitous tumble comparable to plunges recorded during previous disruptions, Westpac chief economist Bill Evans said.
“Last month, responses to our quarterly questions highlighted the clear drivers of weakening sentiment were around inflation, the domestic economy, interest rates and international conditions, but sentiment around the labour market remained strong,” he said.
The ‘time to buy a major item’ sub-index was also relatively steady, falling 0.9%, having posted monthly declines of 3-6% over the previous four months, but house price expectations cooled rapidly, led by NSW and Victoria.
The ANZ-Roy Morgan weekly measure of consumer confidence data also dipped, by 2.1%, felt in all four of the largest states but increased slightly in South Australia.
According to ANZ head of Australian Economics, David Plank, the decline was driven by concerns about the economic outlook and household finances. “The rate hike last week weighed on sentiment, with confidence falling for people paying off a mortgage by a sharp 5.4%. This continues the trend in place since late April when the high March quarter inflation report brought forward rate hike expectations. Since then, confidence amongst mortgage holders has fallen 25%,” he said.
In the longer term, only 12% of Australians are expecting ‘good times’ for the economy over the next five years. And when it comes to buying intentions just 25% said now is a ‘good time to buy’ major household items while 47% said it was a ‘bad time to buy’.