Australia's consumer confidence tumbled in April, as rising fuel prices and interest rates added to cost-of-living pressures and weighed heavily on economic sentiment, according to a survey by Westpac and the Melbourne Institute published Tuesday.
The Westpac-Melbourne Institute Consumer Sentiment Index fell sharply around 13% to 80.1 in April from 91.6 in March.
Australian consumers are facing renewed cost-of-living pressures from rising fuel prices and a 25-basis-point rate hike, driving sentiment to near historical lows and signaling prolonged weakness similar to the 2022 to 2024 inflation period, said Matthew Hassan, head of Australian macro-forecasting at Westpac.
All components of the index fell sharply in April, with the biggest declines in "current conditions," especially "family finances vs a year ago," which dropped nearly 17% to 66.8 on higher fuel costs.
Average pump prices reached AU$2.40 per liter in the first week of April, rising AU$0.37 from March, marking the largest increase in the survey's history despite a temporary fuel excise tax cut that lowered prices by AU$0.12 per liter.
Consumers' outlook for the economy and their finances has deteriorated sharply, with both sub-indices falling as they anticipate continued economic strain, higher fuel prices due to the ongoing disruption in the Strait of Hormuz, and little near-term improvement.
Consumers expect higher interest rates and mortgage costs over the next year amid persistent inflation and potential further Reserve Bank of Australia (RBA) hikes, weakening buyer sentiment, as the "time to buy a major item" index fell 15% to 83.3 due to cost-of-living pressures.
Consumers' medium-term economic expectations remain relatively resilient, with the "economy, next 5 years" sub-index down 5.1% to 91.4, suggesting expectations that current challenges are temporary.
Consumers are growing more pessimistic about the labor market, with unemployment expectations rising 9.7% to 147.8 in April, with job loss concerns increasing most notably in energy and interest rate sensitive sectors such as construction and hospitality.
Homebuyer sentiment rose modestly in April, led by gains in the mortgage belt, but it remains well below its long-term average, while price expectations fell sharply but remain relatively optimistic.
The RBA is expected to tighten policy again in May as persistent inflation and energy-driven price pressures outweigh weakening demand and falling real incomes.