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Borrower sentiment falling as inflation soars: ANZ

Consumer confidence has hit its lowest level in almost two years, according to data from ANZ and Roy Morgan.

Sentiment among Australians dropped by 4.1 per cent in the week to 5 June to a reading of 87 points, according to a recent report on ANZ and Roy Morgan’s Consumer Confidence index, based on 1,491 online and telephone interviews.

The consumer confidence level was the lowest captured since mid-August 2000 and fell below the current four-week average of 89.5.

In contrast, the monthly average for the consumer confidence index since 1990 has been 112.4 points.

For those who owned a home, there was a larger fall in confidence.


Consumers paying off a home loan saw their confidence diminish by 6.2 per cent, while those who owned their home saw their confidence tumble by 6.5 per cent.

ANZ head of Australian economics David Plank reported the result was most likely the result of cost-of-living concerns.

Weekly inflation expectations had also increased by 0.2 percentage points to 5.7 per cent, the highest weekly reading since early April.

That bumped the four-week moving average up by 0.2 percentage points to 5.5 per cent.

“Consumers are especially pessimistic about the current economic outlook and their current financial circumstances,” Mr Plank reported.

Among the major states, confidence had been squeezed across NSW, Victoria, Queensland and Western Australia, but it had picked up in South Australia.

NSW and Queensland had the sharpest confidence falls, at 7.5 per cent and 7.2 per cent respectively.

Confidence dropped by a more modest 1 per cent in Victoria and 0.5 per cent in Western Australia, but it had risen by 7.9 per cent in South Australia.

All five subindices measuring confidence had registered losses, with “current financial conditions” dropping by 0.2 per cent, its fourth consecutive weekly decline.

The “future financial conditions” subindex also fell by 4.3 per cent, after a 5.5 per cent decrease the week before.

Looking at “current economic conditions”, sentiment plunged by 9.4 per cent, after a 3.5 per cent gain over the previous three weeks. Confidence in future economic conditions was also down by 2.1 per cent.

The subindex measuring consumer sentiment on “time to buy a major household item” was also down by 4.7 per cent, after a 10.1 per cent rise over the previous two weeks.

The RBA has indicated that it will keep a keen eye on consumption and factor it into future rate decisions, to ensure that is setting appropriate monetary policy.

But last week’s 50-bp cash rate hike will be the second movement of a series of steps to come, RBA governor Philip Lowe confirmed. 

Dr Lowe also stated that he expects inflation will keep rising, fuelled by higher prices for electricity, gas and petrol – before moderating as global supply-side issues are resolved.

But with the recent surge in house prices adding to household wealth, along with higher levels of savings built up through the pandemic, the RBA expects consumption growth will remain strong in 2022.

Meanwhile, CoreLogic research director Tim Lawless noted the June 50-bp cash rate rise came as a “double whammy for indebted households”.

“Higher costs for food, fuel and finance are likely to see household savings continue to taper as families funnel more of their income towards servicing their mortgage and funding essential costs of living,” he wrote.

[Related: Housing affordability continues downward spiral: REIA]

Borrower sentiment falling as inflation soars: ANZ

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