Australian consumer confidence fell in early October following the latest interest hike by the Reserve Bank of Australia, with economists raising concerns about consumer spending ahead.
According to ANZ and Roy Morgan, its consumer confidence index decreased 3.4 points to 67.1 in early October – the lowest rating for over four months since late May, coming after the RBA raised interest rates to a 15-year high of 4.6 per cent.
Confidence is a large 18 points lower than a year ago, and 5.1 points below the 2026 weekly average of 72.2.
ANZ economist Sophia Angala said the latest result is the tenth lowest point for the series since it began in 1973.
“Confidence in current and future financial conditions and in the short-term economic conditions fell to its lowest levels since late May, suggesting the RBA rate hike may be weighing on household sentiment,” Angala said. “Confidence fell across all housing cohorts. It declined 2.1 points for outright homeowners and 2.6 points for mortgage holders. Renters recorded the largest fall (down 6.1 points), though they remain the most confident cohort.
“We still think another rate hike in November is more likely than not, as we expect Q3 trimmed mean inflation to exceed the RBA’s forecasts. This would take the cash rate to 4.85 per cent, its highest since 2008, which would likely weigh on consumer spending.”
Falling consumer sentiment also comes amid elevated fuel prices, which is weighing on cost-of-living pressures as well as business costs for retailers. CreditorWatch chief economist Ivan Colhoun said it is a bit surprising that the fuel price rises did not have an even bigger impact on sentiment.
“The questions related to family finances saw the biggest falls in the month – again not surprisingly,” Colhoun said. “This is rapidly becoming a more difficult issue for the Federal Government as the cost of living continues to grow relatively quickly from the already much higher levels of recent years.
“Similarly, ongoing cost increases on top of previous rises are a significant issue for businesses. A recent CreditorWatch survey saw cost-of-living as the most negative factor affecting the business outlook, while rising business costs also figured prominently.”
Across ANZ and Roy Morgan’s index, confidence was driven down this week thanks to less confidence about personal finances compared to a year ago, and fewer people saying now is a ‘good time to buy’ major household items.
Now just over one-in-seven (15 per cent – down 2ppts) of Australians say their families are ‘better off’ financially than this time last year compared to a rising majority of 56 per cent (up 6ppts) that say their families are ‘worse off’.
Just one-in-five, 20 per cent (unchanged) of respondents expect their family will be ‘better off’ financially this time next year, while a rising 45 per cent (up 2ppts) expect to be ‘worse off’.
Net sentiment regarding the economy over the next year deteriorated this week, with only 5 per cent (down 1ppt) of Australians expecting ‘good times’ compared to 46 per cent (up 2ppts) who expect ‘bad times’.
Australians’ views about the economy’s performance over the next five years are virtually unchanged, with 7 per cent (down 1ppt) of Australians expecting ‘good times’ for the economy over the next five years compared to almost a third, 32 per cent (down 1ppt), expecting ‘bad times’.
Meanwhile, net buying intentions declined this week, with just 14 per cent (down 2ppts) of respondents saying now is a ‘good time to buy’ major household items compared to an increasing plurality of 47 per cent (up 3ppts) that say now is a ‘bad time to buy major household items’.
While Angala at ANZ is predicting another rate hike in November, smack-bang in the middle of peak period, CreditorWatch’s Colhoun thinks the next uplift may not occur until February 2027.
“I don’t expect that the current setting of monetary policy will be sufficient to return inflation to target in the second half of 2027, though communications at the Governor’s press release suggested the Board remains on a gradual tightening strategy, so the next move might not occur until February,” he said.
Colhoun also pointed out that the RBA does not place much weight on the consumer confidence survey and has noted in recent times that the series is not closely correlated with consumer spending.
“My preference is very much to look at sustained trends in various parts of the survey,” the chief economist said.
He highlighted two main trends of note, including how family finances versus a year ago have been at very low levels, reflecting the rising cost of living, alongside unemployment expectations. On the latter, he said that while it is a little volatile and rose slightly, it has not risen significantly.
“The Australian consumer seems pincered between a high and still rising cost of living, albeit with broadly very low unemployment,” he said.