RBA interest rates: Consumer confidence in freefall as more mortgage pain looms

Consumer confidence has taken another dive to a fresh record low as households digest the financial consequences of another interest rate rise that will add even more to their monthly mortgage repayments.

The weekly ANZ-Roy Morgan survey showed consumer confidence slipped 3.4 points to 67.1 points — its 10th-lowest result since the series began in 1973 — after the Reserve Bank lifted the official cash rate to a 15-year high of 4.6 per cent last Tuesday.

The four-week moving average dropped 1.2 points to 70.9 points.

A score of 100 points to a neutral view on confidence, with anything above that figure suggesting a more upbeat outlook.

“Confidence in current and future financial conditions and in the short-term economic conditions fell to its lowest levels since late May, suggesting the RBA rate hike may be weighing on household sentiment,” ANZ economist Sophia Angala said on Tuesday.

RBA governor Michele Bullock last week warned it could take a recession to control inflation, which has remained outside the central bank’s preferred 2 to 3 per cent range for more than a year.

Conflict in the Middle East and booming demand for AI data centres were expected to keep inflation elevated, she said.

“The board will raise interest rates again if that’s what needed to bring inflation down,” Ms Bullock said.

“High inflation hurts all of us, especially the most vulnerable. Pay packets don’t go as far as they used to and that’s why we need to stop this high inflation.”

Big-four lenders Westpac and ANZ are both tipping the RBA will be forced to move the cash rate higher at its next meeting in November, taking it to a level not seen since 2008.

The slide in consumer confidence comes as households with an average new mortgage of $731,000 will now see their repayments climb by another $121 a month. Across all four rate hikes so far this year, that’s an extra $475 a month — or $5700 a year.

While confidence among all households fell 2.1 points, the sharpest falls came from those with a mortgage (down 2.6 points) and renters (down 6.1 points).

Respondents’ views on how their finances compare to a year ago fell 8.4 points and their outlook for future conditions over the next 12 month dropped 1.9 points, suggesting households expect their finances to deteriorate further.

Short-term economic confidence over the next 12 months was down 2.7 points while medium-term economic confidence over the next five years increased just 0.5 points.

The ‘time to buy a major household item’ sub-index eased 5 points.

The Australian Bureau of Statistics last week reported that inflation in August had soared to a three-month high of 4 per cent — up from 3.5 per cent in July.

Automotive fuel prices surged by 13.5 per cent over the year but during August alone, prices increased by 14.8 per cent leading to overall transport costs rising by 5.6 per cent on an annual basis.

“We still think another rate hike in November is more likely than not, as we expect Q3 trimmed mean inflation to exceed the RBA’s forecasts,” Ms Angala said.

“This would take the cash rate to 4.85 per cent, its highest since 2008, which would likely weigh on consumer spending.”