Australia’s consumer confidence edges lower on inflation fears
AUSTRALIA’S consumer confidence dipped in May as households expressed concern about persistent inflation potentially prompting the Reserve Bank of Australia (RBA) to raise interest rates again, offsetting a boost from last week’s budget.
Sentiment fell 0.3 per cent to 82.2 points, with 100 being the dividing line between pessimists and optimists, a Westpac Banking survey showed on Tuesday (May 21). The result comes after Treasurer Jim Chalmers handed down his annual fiscal blueprint that may be the centre-left government’s last before an election.
“Renewed cost-of-living pressures and inflation concerns have more than offset what looks to have been a relatively well-received Federal Budget,” said Matthew Hassan, a senior economist at Westpac. “While expectations improved a touch in May, this was overshadowed by a further deterioration in current conditions and fears that persistently high inflation may require further interest rate rises.”
Australians have faced an income squeeze from persistently high inflation and elevated borrowing costs that currently stand at a 12-year high of 4.35 per cent. Central banks worldwide are trying to gauge whether to keep policy tighter for longer to stamp out price gains or if they can begin to ease up on that pressure.
As well as budget spending measures including energy rebates, households will benefit from tax cuts that are due to come into effect on Jul 1.
“Importantly, the sentiment level and mix, and responses to additional questions about July’s tax cuts point to continued spending restraint by consumers heading into the second half of the year,” Hassan said.
The RBA raised rates by 4.25 percentage points between May 2022 and November last year, its most aggressive tightening cycle in a generation as it tries to rein in an inflation breakout triggered by pandemic-era stimulus.
Westpac’s survey also showed:
- Responses to an extra question on the impact of the Budget on family finances suggested fiscal measures were relatively well-received.
- The finances compared to a year ago sub-index dropped 3.6 per cent to just 63.2.
- The time to buy a major item also declined, falling 2.8 per cent to 76.5.
- The time to buy a dwelling index rose 1.6 per cent to 76.5. BLOOMBERG
Share with us your feedback on BT's products and services
