Data Snapshot - Consumer Sentiment - Household Budget Worries Intensify

  • The Westpac-Melbourne Institute consumer sentiment index fell for a sixth consecutive month, dropping 5.6% to 90.4 in May. The result marks the largest one-month fall in sentiment since August 2020, when Melbourne was in its second lockdown.
  • Consumers are increasingly concerned about the rising cost of living as annual headline inflation in the first quarter of 2022 printed at the fastest pace in over two decades. The survey also captured the Reserve Bank’s (RBA) first interest rate hike since 2010.
  • The combination of rising interest rates and high inflation is unsettling consumers. Consumers with a mortgage are facing a reduction in their disposable incomes as borrowing costs rise, while they are getting less bang for their buck as their purchasing power is eroded by higher prices.
  • Across the states, Tasmania and Queensland experienced the steepest drop in sentiment in May. NSW, WA, Victoria and SA also experienced a fall in confidence in the month.
  • Consistent with rising housing affordability constraints and the commencement of the RBA’s rate hike cycle, the time to buy a dwelling index fell a further 1.6% to 77.5. The index is at its lowest level since April 2008, in the midst of the RBA’s last rate hike cycle.
  • Consumers face a mixed picture. The strong jobs market and the large saving buffers accumulated by households will support spending this year. However, rising inflationary pressures and expectations of further rate hikes are likely to continue to weigh on sentiment


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Bank of Melbourne Weekly Econ&hellip