Australian Consumer Sentiment Hits Four-Year Low Amid Rate Hikes

Australian consumer sentiment fell to its lowest level in four years in November, with the Westpac-Melbourne Institute Consumer Sentiment Index dropping 2.7% to 78.2. This decline is driven by 4.3% inflation, petrol prices approaching A$2.40 per litre, and a decision by the Reserve Bank of Australia to raise the cash rate by 25 basis points to 4.85%, an 18-year high.

Confidence among mortgaged households has crashed to its lowest level since 1994. Over 70% of consumers expect mortgage rates to continue rising, and house price expectations have turned negative for the first time since November 2022. Reserve Bank Governor Michele Bullock warned that the coming year would "feel like it’s a recession."

Business conditions have also deteriorated, particularly in Victoria, where a NAB survey found conditions fell to negative six points in October, the lowest of any Australian state. Opposition Leader Angus Taylor criticized the federal government for a growing rift with the business community, claiming 46 small businesses fail daily due to rising operational and power costs.

Prime Minister Anthony Albanese has defended Treasurer Jim Chalmers amid political pressure over inflation and planned spending cuts in the mid-year budget update. While households remain pessimistic, financial markets are pricing in a potential rate cut by August 2027, supported by a 20% plunge in Brent crude oil prices.