Investing.com-- Australian consumer sentiment deteriorated further in early-September, a private survey showed on Tuesday, as dwindling household savings, sticky inflation, and high interest rates largely outweighed a less hawkish outlook for the RBA.
The Westpac-Melbourne Institute Index of Consumer Sentiment dropped 1.5% to 79.7 in September, remaining close to its worst level since the 2020 COVID-19 pandemic. The reading was driven by persistent pessimism among consumers, especially over rising rents and a renewed surge in fuel prices.
While consumers saw a lower chance of more interest rate hikes from the Reserve Bank of Australia, especially after inflation eased substantially this year, they also saw few chances of an interest rate cut over the next year.
Concerns over the budget and taxation also dented sentiment, as consumers looked out for more government support- particularly tax relief- amid an increasing cost of living.
Rising fuel costs were a major contributor to increased living costs, especially as global oil prices shot up to 10-month highs in recent weeks. Higher oil prices also spurred concerns over a resurgence in inflation.
While inflation has fallen substantially this year, it still remains well above historical averages, as well as the RBA’s annual 2% target. But the central bank has now kept rates on hold for four straight months, and has reiterated a data-driven approach to future hikes.
“We continue to expect rates to remain on hold until the August Board meeting in 2024. By then we anticipate inflation to have fallen to 3.4%; the unemployment rate to have risen to 4.5% and annual growth in consumer spending to have slowed to just 0.8%.
By then it will certainly be time for both the monetary and fiscal authorities to provide some much-needed support for Australian households,” Westpac Chief Economist Bill Evans said in a note.
Consumers remained largely risk-averse with their investments, and also showed little inclination towards buying a house.