Australians’ confidence has slumped back towards pandemic‑era lows, yet Westpac has said it still expects the Reserve Bank to press ahead with more rate rises.
Westpac noted on Tuesday (14 April) that its Consumer Sentiment Index tumbled 12.5 per cent in April to 80.1, from 91.6 in March.
This marks the steepest monthly fall since the onset of the COVID‑19 pandemic and returns confidence to levels normally associated with recession.
Westpac’s head of Australian macro‑forecasting, Matthew Hassan, said the result marked a return to the sort of pessimism seen in previous downturns, noting that the index was “back near historical lows”.
Hassan said the collapse was being driven not just by cost‑of‑living fatigue but by renewed fears that weakness would drag on.
“Sharp deterioration in expectations suggests consumers are bracing for a return to the extended period of weakness seen during the 2022–24 inflation fight,” he said.
The ‘family finances versus a year ago’ subindex plunged 16.7 per cent to 66.8, which Hassan described as “an extremely low read”.
Fuel shock and rate fears bite
The survey pointed squarely to the latest fuel price spike as the immediate trigger for April’s crash in confidence.
Westpac noted average petrol prices jumped to $2.40 a litre in the first week of April, up 37¢ from the time of the March survey and 77¢ from early February.
Hassan said this was “easily the biggest rise in the history of the survey”, comparable in percentage terms to the 50 per cent annual surge during the 1979 oil crisis.
That energy shock is feeding into both cost‑of‑living pressures and expectations for further rate tightening, with rate expectations rising an additional 3.9 per cent in April to 177.2.
Just over 80 per cent of respondents who expressed a view said they expected variable mortgage rates to rise over the next 12 months, and 40 per cent said they were factoring in increases of more than 1 percentage point.
Jobs anxiety and housing expectations
Job security concerns also intensified, with the unemployment expectation index jumping 9.7 per cent to 147.8 – the worst reading on job worries since 163 in August 2020.
Yet housing sentiment delivered a more nuanced picture, with price optimism cooling from elevated levels, while buyer sentiment remained weak.
Westpac’s House Price Expectations Index fell 10.2 per cent in April to 153.5, with the pullback concentrated in NSW and Victoria – down 13 per cent to 151 and 14.5 per cent to 144, respectively.
It comes after the economics team of Australia and New Zealand Banking Group (ANZ) redrew it’s house price forecasts for 2026 and 2027, as a result of “higher interest rates and weak confidence”.
While ANZ had previously expected house prices in Australian capital cities to grow 4.8 per cent this year, this has been marked down to 2.8 per cent.
It also believes that house prices will only grow by 2.1 per cent across the capital cities in 2027.
However, Hassan stressed that households still anticipated further capital gains.
“Even with the decline, price expectations are still relatively bullish, well above the long‑run average of 130,” he said.
Westpac sees more hikes despite ‘consumer collapse’
Hassan said the survey painted a picture of households heading back into a period of falling real per‑capita incomes and spending.
“The April consumer sentiment survey shows the spike in fuel prices and higher interest rates are weighing heavily,” he said.
He warned that this was likely to show up more forcefully in consumption data over the coming quarters.
Despite the decline, Westpac said that the RBA’s chief concern was lowering inflation back to target levels and the risk that the energy shock triggered broader price pressures.
“The main focus will continue to be on inflation and how the balance of risks – between slower growth and higher energy and other costs – affect inflation expectations,” Hassan said.
Against that backdrop, Westpac is maintaining its call for 25‑basis‑point cash rate hikes at the RBA’s May, June, and August meetings.
[Related: Bendigo breaks from majors after tipping midyear rate hike]
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