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Australian consumers are increasingly losing confidence in the economic outlook as the Reserve Bank of Australia (RBA) warns of rising inflation and further interest rate hikes are imminent.
The Westpac-Melbourne Institute Survey The Consumer Emotion Index showed that it fell 4.5% to 86.4 in June after the RBA decided to raise its cash rate from the previous 0.35% to 0.85%.
Westpac’s chief economist, Bill Evans, said that in the 46-year history of the survey, the consumer confidence index was below these levels only five times, including the 1980s COVID-19 pandemic and recession. Said it was. 1990s.
In addition, Another survey According to ANZ and Roy Morgan, consumer confidence plunged 7.6% in the week starting June 6 to 80.4 points, the lowest level since April 2020.
Only 10% of respondents expect the Australian economy to be a “good time” over the next five years, a record low, said David Plank, head of the Australian economy at ANZ Bank. Said.
Pessimistic sentiment arises after RBA Governor Philip Lowe warns that inflation will skyrocket to 7% by the end of 2022, which could trigger more interest rate hikes to stabilize the economy.
The Governor emphasized that central banks need to take decisive action to curb rising inflation.
“We will do what we need to do to bring inflation back to a few percent,” Rowe said in an ABC television interview on June 14.
“We are confident we can do that, but it will take time.”
Rowe also said the RBA could raise the cash rate to 2.5%.
Meanwhile, Evans said rising inflation would cause problems for the Australian economy.
“The RBA needs to quickly normalize its policies in order to start tackling this very daunting task,” he said.
“Another 50 basis points in July will be a further decisive step in this process.”
Rowe’s warning appeared as follows Global stock market plunges That’s because the Federal Reserve is aggressively raising interest rates to combat inflation, threatening to put the world’s largest economy into recession.
Inflation in the United States surged to 8.6%, reaching its highest level in 40 years.
However, RBA Governor said the Australian economy will continue to grow strongly over the next six to twelve months.
“There is still a backlash from all the restrictions on COVID-19. People are spending in ways they couldn’t do last year,” he said.
Lowe also said that the construction sector has a large backlog of unstarted work and jobs are at a very high level.
“Therefore, people can be confident that the job is there, and in that environment people will continue to spend,” he said.
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Alfred Bui is a Melbourne-based Australian reporter with a focus on local and business news. He is a former small business owner and holds two master’s degrees in business and business law. Contact him at [email protected].
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