Australia’s consumer confidence dropped in December due to ongoing inflation, high domestic interest rates, and global instability, which heightened uncertainty about the economic outlook.
According to a Westpac Banking Corp. survey released on Tuesday, sentiment fell by 2% from the previous month to 92.8 points. Although consumer sentiment has significantly improved over the year, it remains subdued, with 100 points marking the threshold between optimism and pessimism.
According to Westpac senior economist Matthew Hassan, there has been “a loss of confidence around the outlook, particularly for the economy. That likely reflects several factors including: a disappointing September quarter national accounts update; ongoing uncertainty around inflation and the potential for interest rate easing; and a more unsettled global backdrop.”
Household sentiment has remained weak in the post-pandemic period as a spike in inflation led the Reserve Bank to lift interest rates to 4.35%, where they have stayed throughout this year, Bloomberg reports.
This has put significant pressure on the private sector, with the economy showing minimal growth in the second and third quarters and the property market slowing down.
“Consumer sentiment towards housing deteriorated in December, with homebuyer sentiment falling back to very pessimistic levels and price expectations continuing to soften,” Hassan added.
Indeed, the time to buy a dwelling index dropped 6% to 81.6.
The survey was conducted during the week ending 13th December, capturing the Reserve Bank of Australia's meeting last week, where it expressed growing confidence that inflation is being tamed, as well as Thursday's unexpected decline in unemployment to 3.9%.
“The biggest pull-back was around expectations for the economy. The economic outlook, next 12 months sub-index dropped 9.6% to 91.2, while the economic outlook, next 5 years sub-index fell 7.9% to 95.9. Both sub-indexes unwound about half of the rally seen over the previous two months,” Hassan went on to say.