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The Westpac–Melbourne Institute Consumer Sentiment Index, which surveys around 1,200 Australians each month, fell 4.7 per cent to 80.4 in October, down from 84.4 in September.
However, the same sentiment read across the 40 per cent surveyed after the Reserve Bank of Australia (RBA) decision to hike rates came in at 67.2 per cent – an almost 20 per cent drop and the worst reading this century.
The result is among the 40 weakest readings since the monthly survey began in the early 1970s, with sentiment now in its worst period of recurring weakness since the recession of the early 1990s.
The decline was broad-based, with pessimists outnumbering optimists in 102 of the 106 consumer groups tracked by Westpac.
Interest expectations pessimistic, but belief in housing market bucks trend
Despite four interest rate hikes this year, consumers are increasingly expecting mortgage rates to rise past the current 4.6 per cent.
The Mortgage Rate Expectations Index rose 5.5 per cent to 179.7 in October. More than 80 per cent of respondents surveyed after the latest RBA decision expected mortgage rates to increase over the next 12 months, compared with 63 per cent in September.
Among consumers in the mortgage belt, that figure was close to 90 per cent, with more than 40 per cent expecting rates to rise by more than one percentage point.
Forecasts among the major banks remain split on the direction of the official cash rate.
Westpac and Australia and New Zealand Banking Group have forecast one additional 0.25 percentage point rate hike, while the Commonwealth Bank of Australia and National Australia Bank are yet to shift their formal peak-rate forecasts to 4.85 per cent, although both acknowledge that the balance of risks has become more hawkish.
However, housing sentiment was one of the few areas to improve, with the index measuring whether it is a good time to buy a dwelling rising 3.4 per cent to 88.4.
However, the measure remains 8.3 per cent below its level a year ago, while the proportion of consumers saying it is a bad time to buy continues to outweigh those saying it is a good time across almost all groups.
House price expectations also increased, rising 4.3 per cent to 115.1, although the index remains 33.1 per cent below its level a year ago.
“Improvements following an interest rate rise are rare but not unheard of, particularly when buyer sentiment is already coming from a very weak level,” said Matthew Hassan, head of Australian macro-forecasting at Westpac.
“Across subgroups, the improvement was more pronounced for outright home owners, retirees, 25–34-year olds and those earning over $80k a year.
“That said, the proportion saying now is a bad time to buy still outnumbers the share saying it is a good time to buy in nearly all subgroups.”
‘Cost-of-living nightmare’
Household finances took a significant hit, with the index measuring family finances compared with a year ago falling 8 per cent to 66.9, matching April’s low. The measure is down 18.6 per cent from a year ago.
Expectations for household finances over the next 12 months also fell, declining 6.4 per cent to 88.4, placing the measure in the bottom 10 per cent of results recorded since the survey began.
Meanwhile, the Household finances took a significant hit, with the index measuring family finances compared with a year ago falling 8 per cent to 66.9, matching April’s low. The measure is down 18.6 per cent from a year ago.
Expectations for household finances over the next 12 months also fell, declining 6.4 per cent to 88.4, placing the measure in the bottom 10 per cent of results recorded since the survey began.
“Australian consumers remain stuck in a cost-of-living nightmare that seems to have no end in sight,” Hassan said.
“The survey detail shows consumer concerns are still primarily about the cost of living and high interest rates than the more acute job and insolvency problems that arise during a recession. However, these pressures are still both broad and intense.”
Hassan noted that oil prices, combined with the RBA’s decision to hike rates have been the primary points of issue for consumers.
“Average weekly pump prices have pushed back over $2.30/litre nationally, to be near the peaks seen back in April and up nearly 25 per cent since the start of the year.
“Meanwhile the latest RBA interest rate move takes the cash rate to 4.6 per cent, the highest since 2011, with the standard variable mortgage interest rate set to push above 9 per cent for the first time since 2008.
“The latest RBA move looks to have badly rattled consumers. Responses over the course of the survey week show a very sharp deterioration after the decision was announced.”
[Related: Four 2026 rate hikes deal $90k blow to borrowing capacity]
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