Why Australian consumers are gloomier now than they were during the last rate hike cycle

Australians are now grumpier than they were three years ago during an even more aggressive rate hike cycle.

In fact, the oil crisis Donald Trump started in February is leaving consumers in an even worse mood compared with any other oil crisis going back to 1973.

Anthony Albanese, who came to power in the aftermath of another oil crisis, is also Australia’s only prime minister in more than five decades of consumer sentiment records to have only governed during a time when pessimists have had the numbers.

A consumer confidence reading is considered to be gloomy if the reading is below the 100-point level where optimists make up the silent majority.

Firming odds for a fifth rate hike this year on Melbourne Cup day are making the average punter feel particularly unlucky.

In the week ending on October 25, the weekly ANZ-Roy Morgan sentiment score stood at 67.9 points.

This was even worse than the 74.3-point score of November 2023, following 13 RBA increases in less than 18 months, after Russia’s Ukraine invasion led to crude oil sanctions.

The opening weeks of the Iran war caused consumer sentiment to sink to an all-time low of 58.8 points reached at the end of March, in the weeks following the US and Israel strikes on Iran, which was the worst reading since records began during another oil crisis in 1973.

But an average, yearly basis, 2026 is in fact the glummest in 53 years of records.

The 72-point average for 2026, so far, is by far the worst.

While inflation is high now, in 1974 it was more than four times the level at 16.7 per cent, following the OPEC oil crisis.

But consumer sentiment was barely underwater at 95.4 points.

More than five decades later, the continued blockades in the Strait of Hormuz and attacks on Saudi oil pipelines have suppressed any kind of sustained recovery in consumer sentiment.

The online and telephone survey of 1073 respondents show Australians are particularly downbeat about 2027 with the “economic conditions next year” question eliciting a particularly weak score of 58 points.

Australians aren’t particularly keen on buying a major household item either.

Hope is unlikely to improve with economists expecting inflation data for September, due out on Wednesday, to show the consumer price index above the RBA’s 2-3 per cent target for the 14th straight month.

Australia’s big four banks are expecting an annual pace of 3.9 per cent, hardly an improvement on the August pace of 4 per cent.

The likely bad news is being delivered 15 minutes after Reserve Bank chief Michele Bullock starts giving evidence to a Senate committee, via video link, alongside her deputy Andrew Hauser and the RBA’s three assistant governors Sarah Hunter, Brad Jones and Christopher Kent.

The futures market now regards another hike on Tuesday next week as a 62 per cent chance, that would take the cash rate to 4.85 per cent - the highest level since December 2008 during the early days of the global financial crisis.

Even after the collapse of American financial services giant Lehman Brothers, the ANZ-Roy Morgan consumer confidence reading was still only borderline negative with a 99.8-point score.

During the COVID lockdowns of 2020, the average consumer sentiment reading for that year was at 96 points, hardly far below the tipping point where pessimists have the numbers.

Since Mr Albanese won the May 2022 election, ending Labor’s almost nine years in the political wilderness, the monthly average consumer sentiment reading has never been above the 100-point level.

No other prime minister has governed during a time of such sustained weak consumer sentiment, with every other PM since Gough Whitlam — Labor and Liberal — governing during some periods when optimists were the majority.