Consumer sentiment among mortgaged Australian households has declined sharply, with the latest Westpac survey registering a four-year low in November amid deepening concerns about near-term economic prospects. The confidence levels among indebted households have reached their weakest point in records extending back to 1994, reflecting widespread anxiety about household finances and economic conditions.
According to Westpac’s head of economic forecasting, Matthew Hassan, the current mood among households matches conditions last seen in 2022 when inflation approached 8% and interest rates had risen substantially. Hassan noted that readings this weak have historically been observed only during major economic disruptions, including the onset of the Covid pandemic, the global financial crisis, and recessions in the early 1980s and 1990s. The survey revealed that confidence in the economic outlook over the coming year reached its weakest point since August 2020, during the pandemic period.
Hassan described a prevailing sense of “helplessness” among households regarding economic conditions, comparing current sentiment to the mood during the pandemic’s second Melbourne lockdown. He suggested that many households perceive much of what is occurring as beyond their control, citing rising fuel prices as an example, while questioning how much authorities can realistically do to shield Australians from external economic pressures. The government faces mounting pressure over persistent cost-of-living issues as it prepares a mid-year budget update focused on spending cuts to address inflation concerns.
Despite the darkening mood in the community, financial markets have begun adjusting expectations for interest rate policy. Market data indicates that the probability of a Reserve Bank rate cut exceeds 50% by August next year, with a decrease to 4.6% fully priced in by December 2027. This shift follows a notable retreat in global oil prices, with Brent crude dropping approximately 20% from its late-October peak of nearly US$118 per barrel to below US$94. Economic forecasters have indicated their base case includes rate reductions commencing from August next year, with no additional rate increases anticipated.
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