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MNI BRIEF: Aussie Consumer Sentiment Slumps On Budget, Rates

MNI (PERTH)
(MNI) Perth

The Reserve Bank of Australia's wariness about household spending following seven consecutive rate hikes has been underscored by a slump in the consumer sentiment to close to record lows in October, according to the Westpac - Melbourne Institute Consumer Sentiment Index released on Tuesday.

Consumer sentiment slumped 6.9% to 78, a point below Global Financial Crisis levels and just above the 75.6 recorded in April 2020 during the first stages of the pandemic. The slide in sentiment was slated to the recent Federal Budget that forecast a 56% increased in electricity prices over the next two years and the lack of immediate support for household finances.

The RBA's aggressive rate hiking cycle is also taking a toll. Nearly 60% of respondents expect rates to increase by 1 percentage point or more over the next year, a rise from 54% last month. Nearly 40% of respondents expect to spend less on Xmas gifts this year, a survey high and a concern for policymakers. The RBA downshifted from 50bp hikes to 25bp at its October meeting, citing concerns about the lagged impact of a large rise in interest rates that was yet to be reflected in mortgage repayments. Another 25bp hike is expected in December. (See MNI RBA WATCH: Hikes 25bp, To Miss Inflation Target Until 2025)

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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