In a stark warning to the Australian economy, a Westpac consumer sentiment survey released in November revealed that confidence among households with mortgages has fallen to its lowest level since 1994. The survey’s consumer sentiment index slipped to a four‑year low, reflecting deepening pessimism about the near‑term economic outlook.
Westpac’s head of economic forecasting, Matthew Hassan, noted that the mood among households is comparable to that of 2022, a year when inflation hovered close to 8% and the Reserve Bank of Australia (RBA) had raised borrowing costs by four percentage points over the previous year. “Prior to that, readings this weak had only ever been seen in the economy’s darkest moments: at the onset of the Covid pandemic; the height of the GFC; and during the recessions in the early 1990s and early 1980s,” Hassan said.
Hassan added that while the current economic backdrop is not as extreme as the pandemic’s immediate aftermath, there are “shades of Covid in the responses” from households. Confidence in the economic outlook for the coming year reached its weakest point since August 2020, the survey showed, matching a low recorded during the pandemic.
Prime Minister Anthony Albanese has been under mounting pressure to address persistent cost‑of‑living pressures. In response, he has defended Treasurer Jim Chalmers, saying the treasurer is “doing a great job” and that he is working closely with Chalmers ahead of next month’s mid‑year budget update. The upcoming budget is expected to include cuts to government spending as the government seeks to contain inflation.
Albanese highlighted Chalmers’ track record of producing budget surpluses and lower deficits, describing him as a “treasurer who’s produced a couple of budget surpluses, lower deficits, [who is] producing economic reform.”
Despite the RBA’s recent signals that a rate cut could be on the table by this time next year, the Westpac survey suggests that households remain wary. The sense of “helplessness” about the economy mirrors the sentiment felt during the second Melbourne lockdown in August 2020, when the government had just begun to scale up income support measures.
In a broader context, the survey’s findings underscore the challenges facing the Australian government as it balances the need to curb inflation with the imperative to support households facing rising living costs. The combination of high inflation, a tightening monetary policy, and a dip in consumer confidence paints a cautious picture for the Australian economy heading into the next fiscal year.
Source: The Guardian World
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