© Bloomberg. A man adjusts his mask on Pitt Street Mall in Sydney, Australia, on Monday, Oct. 11, 2021. Residents of New South Wales who have received both doses of the covid vaccine were on Monday again allowed to start visiting non-essential retail stores, pubs and gyms, with capacity limits. The government eased lockdown measures once 70% of people over age 16 were fully vaccinated. Photographer: Brendon Thorne/Bloomberg
A measure of Australia’s consumer sentiment plunged 6% last week in response to expectations that a surge in inflation will prompt the Reserve Bank to raise interest rates.
The Consumer Confidence index fell to 90.7, the lowest level since August 2020, according to a statement Tuesday from Australia and New Zealand Banking Group Ltd. A figure below 100 indicates pessimists outnumber optimists. The downcast mood follows data last week that showed consumer prices surged an annual 5.1% in the first three months of the year, the fastest pace in 21 years.
That triggered expectations that the RBA will raise its cash rate by 15-basis points at today’s meeting in what would be the first rate rise since 2010. The decision is due at 2:30 p.m. Sydney time. The ANZ report said this is the lowest confidence reading at the start of a tightening cycle since the early 1990s.
“This may see the RBA tighten more slowly than the market pricing,” said David Plank, head of Australian economics at ANZ.
Financial markets are predicting rapid rate hikes by the RBA, sending the cash rate to 2.6% at the end of this year and 3.4% by April 2023.
Today’s data showed confidence dropped 9.6% among people “paying off their home loan.” For those who already own their home or are renting, it fell by 4.7% and 4.2%, respectively.
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