The Westpac Melbourne Institute Index of Consumer Sentiment fell by 6.9 per cent, from 83.7 in October to 78.0 in November.
This month’s print of 78.0 is now below the low point of the GFC (79.0) and only slightly higher than when the COVID-19 pandemic first hit in April 2020 (75.6).
Prior to that, we need to go back to the deep recession in the early 1990s to find a weaker read, Westpac chief economist, Bill Evans, said.
“The latest sentiment decline follows ABS figures showing inflation surged from 6.1 per cent in June to 7.3 per cent in September, with official forecasts for inflation to go even higher by the end of 2022 and to remain relatively high through 2023,” Mr Evans said.
“Consumers would also have been unnerved by forecasts in the Government’s October Budget showing electricity prices are expected to increase by 56 per cent over the next two years,” he said.
However, Mr Evans said interest rate rises were a clear factor weighing on confidence in the month.
“The RBA raised the official cash rate by a further 0.25ppts at its November meeting, the announcement coming mid-way through the survey week. Sentiment amongst those surveyed before the decision showed a steady 83.1 but sentiment amongst those surveyed after showed a steep fall to 75.6,” he noted.
“Given that the move was widely anticipated, the negative response likely reflects the clear signal from the governor that further increases can be expected.”
More consumers expect substantial follow-on rate rises. Among those surveyed after the RBA decision, nearly 60 per cent expect rates to increase by 1 percentage point or more over the next year, up on 54 per cent in the October survey.
The Westpac Index found nearly 40 per cent of consumers expect to spend less on gifts this year — the highest proportion planning cutbacks since Westpac started asking the question in 2009, the average being 33 per cent.
