Australian Consumer Sentiment Hits 2-Year Low in November | So Good News


By Ambar Warrick– Australian consumers grew stronger thanks to the economy in early November, a Westpac survey showed on Tuesday, as rising inflation, higher interest rates, and rising wages weighed heavily on the country’s energy consumption.

The Westpac Melbourne Institute Consumer Sentiment Index fell by 6.9% this month, compared to last month’s fall of 0.9%. The reading was the worst drop in two years, as well as seeing a sharp drop to 78.0.

The reading comes after recent data showed inflation in Australia rose to a 32-year high in the quarter to September, with the Reserve Bank again predicting that inflation will rise for the rest of the year.

The central bank raised interest rates by 25 basis points in November, causing a sharp drop in consumer confidence, although the hike was smaller than the RBA’s earlier this year.

The bank indicated that it is trying to control inflation and ensure that the economy is not affected by high interest rates. The housing market in particular has been hit hard by rising prices this year, which has led to a decline in consumer sentiment.

The RBA’s low interest rate appears to have done little to support their sentiment, as the government’s latest budget appears to be a source of concern for consumers.

The budget highlighted higher electricity prices and immediate pressure on domestic revenues, which have already started to fall due to rising inflation this year.

The RBA also indicated that interest rates will continue to rise in the near future, as inflation has shown no signs of cooling.

To that end, the central bank also lowered its GDP forecast for 2022.

Although the labor market has so far remained strong in Australia, Tuesday’s survey showed that consumers are beginning to lose confidence in their prospects for employment. Expectations of unemployment increased amid wage growth.

Consumer spending has been the driving force behind Australia’s economic growth this year, after the country lifted many of its COVID-related restrictions. But the downside could indicate that this trend could soon change, reflecting the turmoil in Australia’s economy.

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