Australia’s consumer confidence jumped 5%, the largest monthly gain since April 2021, aided by a temporary respite from interest-rate increase as the Reserve Bank’s board doesn’t meet this month.
(Bloomberg) — Australia’s consumer confidence jumped 5%, the largest monthly gain since April 2021, aided by a temporary respite from interest-rate increase as the Reserve Bank’s board doesn’t meet this month.
Consumer sentiment climbed to 84.3 in January, while signaling pessimists still heavily outweigh optimists with a dividing line of 100, a Westpac Banking Corp. survey showed Tuesday. Chief Economist Bill Evans urged caution in interpreting the rise in sentiment as an upward trend, pointing out there wasn’t “an explicit decision” to pause tightening.
“The January read is in the bottom 10% of observations since the mid-1970s,” he said in a statement. “As we move through 2023, we expect inflation pressures to ease, slowly boosting confidence.”
The RBA has raised rates by 3 percentage points since May, its most aggressive tightening cycle in 33 years as policy makers race to rein in spiraling inflation. The hikes have hammered consumer confidence and damped the property market as Australians hunkered down in the face of rising mortgage repayments.
The nation’s household debt-to-income ratio is among the world’s highest at 188.5%.
Most economists predict the RBA will hike two more times from the current 3.1% level for a peak rate of 3.6%.
Even so, expectations for household finances were buoyant in the survey, with the family finances next 12 months sub-index climbing 6.6%.
Confidence in the economy also improved with the expectations sub-index lifting 6.3%, Evans said. The economic outlook next 12 months sub-index jumped 10.2%.
Westpac’s survey was conducted during the week when monthly inflation accelerated faster than forecast, cementing expectations for a rate hike in February.
“Recent evidence of strong retail sales growth; a lift in annual inflation and an ongoing tight labor market will strengthen the case for a further rate increase,” said Evans, who expects a further 75 basis points of hikes.
“That should be complemented by a clear tightening bias to discourage speculation that the February increase will be the last in the cycle.”
(Updates with comment from Evans on rates. An earlier version of this story was corrected.)
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