Aug 02, 2022
August 9, 2022
Higher interest rates, lower confidence
Consumer confidence has fallen 4.5 per cent, more than offsetting gains seen over the previous three weeks. Confidence fell across all mainland states, with major declines in New South Wales, South Australia and Western Australia.
‘Weekly inflation expectations’ increased 0.1 percentage points to 5.6 per cent, while its four-week moving average fell 0.1 percentage points to 5.7 per cent.
All five confidence subindices declined. ‘Current financial conditions’ dropped 1.9 per cent. ‘Future financial conditions’ decreased 5.5 per cent reversing the 5.3 per cent gain the week before.
‘Current economic conditions’ plunged 10.2 per cent, falling to its lowest level since September 2020. ‘Future economic conditions’ lost 2.1 per cent, following a 3.6 per cent increase the week before.
‘Time to buy a major household item’ decreased 4 per cent.
"Consumer confidence declined 4.5 per cent last week, to its lowest levels since April 2020, as the Reserve Bank of Australia, increased interest rates by 50 basis points for the third month in a row to 1.85 per cent," ANZ Head of Australian Economics, David Plank said.
"Household inflation expectations increased 0.1 percentage to 5.6 per cent despite petrol prices falling for a fourth consecutive week. Demand for housing has been dropping, along with house prices."
"That and rising interest rates caused confidence among homeowners to drop 7 per cent last week. So far in 2022, household spending has been robust despite very weak consumer sentiment, with strong employment gains, high levels of household saving and a desire to travel more than offsetting concerns about the rising cost of living."
"It remains to be seen whether this divergence between confidence and spending can continue. Certainly, we expect employment to remain robust through 2022 and wages growth to pick up. This may be enough to keep households spending, even if they feel wary about the outlook."
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