The Westpac-Melbourne Institute Consumer Confidence Index fell 6.9% to 78.5 in February, declining back to historic lows with weaker readings only ever seen during the GFC.
Westpac Senior Economist Matthew Hassan detailed hopes of some easing in both cost of living pressures and interest rate rises have been dashed by strong December quarter inflation and the RBA’s resumption of its interest rate tightening cycle.
“Given that the move was widely anticipated, the negative response likely reflects the clear signal from the RBA Governor that further increases can be expected in the months ahead,” Mr Hassan said.
Aussie consumers continue to be spooked with ‘family finances vs a year ago’ sub-index dropping 8% in February to just 62.1, marking the weakest reading since the recession of the early 1990s.
Further, cost of living pressures are influencing attitudes towards major household purchases, with Westpac detailing a 10.1% fall in the ‘time to buy a major household item’ sub-index to 78, tracking considerably lower than the average of 126.
“There are only three instances of weaker survey reads on this question: April 2008, when the RBA cash rate hit 7.25%; October 2008, at the height of the Global Financial Crisis; and in April 2020 when the COVID pandemic hit,” Mr Hassan said.
“This, and the very weak read on family finances vs a year ago, are a clear warning that consumers are poised to cut back sharply on spending.”
IFM Chief Economist Alex Joiner noted the abysmal state of current family finances reflects the cost of living and rising interest rates and seemingly undermines any remaining thinking that there's much by way of accumulated savings.
On this measure at least the conclusion seems relatively clear... pic.twitter.com/6e8iBnykTg
— Alex Joiner (@IFM_Economist) February 13, 2023
ANZ-Roy Morgan Consumer Confidence Index told a similar tale for the second week of February, with average confidence levels across mortgagees falling to its lowest level since April 2020.
Echoing Westpac’s index, ANZ Senior Economist Adelaide Timbrell noted four of the five confidence sub indices were down.
“The sub-index for whether ‘it is a good time’ to buy a major household item dropped to its lowest level since April 2020,” Ms Timbrell said.
“Four of the five confidence sub indices were down. ‘Current financial conditions’ fell 4.9 points to just above the record low seen in late March 2020. ‘Current economic conditions’ plunged 9.3 points, its third-straight weekly decline.”
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