Roy Morgan and ANZ Bank have reported a dive in consumer confidence in Australia, coming in the week leading up to the Reserve Bank of Australia’s cash rate hike on September 29.
ANZ-Roy Morgan Consumer Confidence decreased 1.5 points to 70.5 in late September – its lowest rating for four months since late May.
Confidence is a large 15.8 points lower than a year ago, and is 1.8 points below the 2026 weekly average of 72.3.
ANZ economist Sophia Angala said the decline was led by weaker confidence in personal finances, which may have been influenced by expectations of a potential rate hike ahead of this week’s RBA meeting. At the meeting today, the RBA lifted the cash rate by 25 basis points to 4.6 per cent.
Angala predicted this could rise again at the November meeting.
“Despite the recent rise in petrol prices alongside higher oil prices, inflation expectations eased over the week, although they remain elevated compared to the beginning of the year,” Angala said. “We expect the RBA to raise the cash rate in September and November, taking it to 4.85 per cent, its highest level since 2008.
“This will likely weigh on household spending growth over the near term.”
The Australian Retail Council (ARC) weighed in on the cash rate hike, warning that another jump will further squeeze household budgets and compound the rising freight and supply-chain costs already confronting retailers as higher fuel prices flow through the economy ahead of the peak trading season.
ARC Chief Economist Glenn Fahey said the latest increase could not come at a worse time for retailers and households.
“The Reserve Bank has a difficult job, and there is no question inflation remains too high,” Fahey said. “However, a fourth interest rate rise this year comes as households and businesses are already confronting significantly higher petrol and diesel prices.”
Higher supply chain costs have been weighing on retailers for much of the year. The latest ABS figures show road freight transport prices surged 15.5 per cent in the June quarter, the largest quarterly increase since the series began in 1997, driven by higher fuel surcharges.
Fahey said that households are now facing higher costs at the bowser and in their mortgage repayments.
“At the same time, retailers are paying more for finance, freight and deliveries as increased fuel costs flow through supply chains," he added.
“Retail spending has remained resilient, but there is a point where it becomes fragile. The combination of another rate rise and sharply higher fuel costs risks taking momentum out of consumer spending just as retailers enter the most important trading period of the year.”
Fahey said retailers were also facing continued pressure across wages, energy, insurance, leasing and compliance. He said that consumers are shopping carefully, waiting from promotions and looking closely at value.
“Retailers can’t pass all of their increased costs on, especially in peak sales periods, so many are absorbing them through tighter margins.
“Many discretionary retailers rely heavily on Black Friday and Christmas to rebuild cash reserves, making the timing of this rate rise seriously difficult.”
The pressure is also showing up in retail insolvency numbers. The latest provisional ASIC figures show 1,006 retail companies entered external administration or had a controller appointed in 2025–26, up 15.5 per cent from 871 the previous financial year. It is also more than triple the amount in 2021–22 and an increase of 215 per cent in four years.
Fahey said the Government must recognise how difficult the business operating environment has become and focus on lifting productivity, reducing the cost of doing business and cutting red tape.
Fahey also encouraged Australians to support the retailers that invest in local jobs and communities.
“When choosing where to spend this peak season, we encourage shoppers to back the retailers that back Australia,” he said. “Australian retailers invest here, employ here and support communities across the country. Backing Australian retail means backing Australian jobs, businesses and the communities they serve.”
KPMG chief economist Dr Brendan Rynne also weighed in on the RBA cash rate hike, echoing Fahey’s point that the bank has no choice amid inflation.
“The Middle East conflict is widening and we appear no closer to a practical peaceful solution that will enable global trade and oil markets to ‘normalise’,” Dr Rynne warned.
“The prospect of even higher inflation has caused Central Banks globally to commence another round of policy rate increases.”
Dr Rynne also noted that Australia’s inflation “problem” is more complicated than just one of external pressures. According to the economist, domestic supply limitations, predominantly caused by sustained weak productivity over the past decade, are constraining the speed limit of the Australian economy, and even current (“historically weak”) growth levels are enough to cause inflation to kick up and be maintained well above the RBA target level of 2.5 per cent.
“This is a challenge that is more pronounced in Australia than most other advanced economies,” Dr Rynne said.
KPMG also thinks the likelihood of another increase in the cash rate at the next RBA monetary policy meeting in November, while not guaranteed, is ‘odds-on’.
The ‘narrow path’ mantra has gone by the wayside, Dr Rynne explained, and the RBA’s credibility is now on the line given the response by other central banks to act quickly to stamp out this latest bout of inflation emerging in the global economy.
“While markets are also betting there is a high likelihood of a third increase in the cash rate, KPMG consider this is less than a 50:50 chance at this stage,” Dr Rynne said.
“Slowing demand and weaker economic conditions as a consequence of the lagged effects of the earlier cash rate increases this year might be enough to have the cash rate peak at 4.85 per cent, but the swing factor as to whether this will happen or not is whether government spending remains ‘tone deaf’ to the recognition that its spending is not helping contain inflation in Australia.”