A sharp rise in fuel prices and the prospect of additional interest rate hikes this year have led to a significant decline in both consumer and business confidence in Australia. Data released by Westpac on Tuesday showed that the consumer confidence index plummeted by 12.5% in April, falling to 80.1 points. Short-term expectations dropped to levels last seen during the post-pandemic "cost of living crisis" of 2022–2023. Matthew Hassan, Head of Australian Macroeconomics at Westpac, stated, "The sharp deterioration in expectations suggests consumers are preparing for a return to the prolonged economic weakness experienced during the 2022–2024 anti-inflation period. The April decline marks the largest monthly drop since the onset of the COVID-19 pandemic."
Separate data from National Australia Bank (NAB) indicated that the business confidence index plunged by 29 points in March to -29, recording the second-largest monthly decline in the survey's history. The business conditions index, which measures sales, profits, and employment, dipped by 1 point to 6. NAB noted that the relative resilience of business conditions "suggests the economy maintained good momentum prior to the current shock." The bank also highlighted a slight increase in capacity utilization, partially reversing recent easing, with seven out of eight industries trending near long-term averages, remaining at high levels overall.
Australia has already raised interest rates twice this year, and money markets anticipate a likely third consecutive hike next month. The oil price shock stemming from conflict in Iran has further intensified the country's resurgent inflationary pressures. Hassan added, "Short-term expectations for the economy and family finances have also deteriorated significantly, indicating consumers see little prospect of improvement and are bracing for more difficulties."
Other data released on Tuesday included a 16.7% collapse in Westpac's "family finances vs a year ago" sub-index to 66.8. The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, rose 3.9% in April to 177.2, returning to recent highs. The "time to buy a major household item" sub-index fell 15% to 83.3. Westpac noted that medium-term consumer expectations showed more resilience, with the "economic outlook over the next 5 years" sub-index declining moderately by 5.1% to 91.4. The Westpac–Melbourne Institute Unemployment Expectations Index jumped 9.7% in April to 147.8, where a higher reading indicates more consumers expect unemployment to rise over the coming year.
According to the NAB survey, forward orders dropped 7 points to -1, erasing cumulative gains since 2026. On a quarterly basis, purchase cost growth doubled to 3%, while product price growth rose to 1.1%. Hassan concluded, "The April consumer sentiment survey reflects heavy pressure from soaring fuel prices and rising interest rates, signaling that we are entering another period of declining real per capita income and spending."
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