The latest interest rate hike has shaken consumers as businesses report a strong start to the year.
Weekly and monthly consumer confidence surveys capture the February rate hike dragging confidence towards lows last seen in the early days of the pandemic.
The monthly consumer sentiment survey from Westpac and Melbourne Institute revealed a 6.9 percent fall in February after consumers reported feeling more optimistic in December and January.
The February score of 78.5 is not much higher than the 75.6 recorded in April 2020—early in the pandemic—but is below the low point of the Global Financial Crisis.
ANZ and Roy Morgan’s weekly consumer confidence index also plummeted in the wake of the latest RBA rate hike, sinking 5.5 points to 78.1, its lowest level since early April 2020.
But NAB’s business survey returned an uptick in confidence and conditions, with confidence lifting to +6 index points and conditions a “very strong” +18 result over January.
Leading indicators edged higher, with forward orders rising three points and capacity utilisation lifting to 85.7 percent—close to record highs seen in mid-2022.
NAB chief economist Alan Oster said the January business survey suggested the economy remained resilient despite headwinds.
“From here, the pace of ongoing supply chain healing and strength of wage growth will be important in shaping how much further cost pressures ease, while the resilience of consumption will continue to be tested as higher rates are passed through to households,” Oster said.
CBA economist Belinda Allen said the business survey pre-dated the hawkish February cash rate meeting, and sentiment would likely soften in February in line with the consumer surveys.
“Consumers appear to have received the message interest rates will move higher,” Allen said.
“But there is a difference between hearing the message and altering spending behaviour.”
Treasurer Jim Chalmers said big challenges face the economy and country.
“Inflation is the number one economic challenge in 2023. And it was in 2022,” he said in parliament.
Chalmers said his government had a three-point plan to address the inflation crisis - providing responsible cost of living relief, repairing supply chains and keeping spending restrained.
“The Reserve Bank made it clear it’s somewhere between a half and two-thirds, a half and three-quarters of the inflation in our economy comes from the supply side.
“And a lot of that is global, but a lot of it, as well, is the consequence of a wasted decade where those opposite left neglected for too long too many of our economic challenges.”
Deputy opposition leader Sussan Ley said the Albanese government was not keeping its spending under control, which would fuel inflation.
“So $45 billion of off-budget spending that the government has announced will feed directly into inflation, and it will directly increase interest rates for people who are already struggling to pay their mortgages,” she told Seven’s Sunrise.
“That’s the problem with this government; you always pay more under Labor.”
