The Westpac-Melbourne Institute Index of Consumer Sentiment for August was released today, revealing that households with mortgages are less fearful of rate hikes, as their confidence increased by 7.8 per cent.
Overall, Australians now have greater confidence that interest rates will remain unchanged for a while. Last week, Oxford Economics also suggested that the RBA will likely keep rates on hold for an extended period, and this sentiment is shared by many.
“Amongst those surveyed … 48 per cent expect rates to rise over the next year, down sharply from the 68 per cent of those surveyed following the August RBA meeting,” Westpac wrote.
This should be contextualised against considerations of the kinds of demographics of those participating in consumer sentiment surveys.
Nevertheless, this data from Westpac follows three pauses from the Australian Central Bank, indicating that Australia believes the RBA’s rate hike strategy is working effectively.
However, despite this quarter-long pause, overall consumer sentiment declined by 1.5 per cent in August to 79.7 points.
Households continue to be concerned about rising living costs, despite reduced worries about mortgage payments.
The “time to buy a dwelling” index increased by only 0.6 per cent, despite a seven per cent decrease in mortgage concerns, and a 2.2 per cent rise in the house price expectation index in August, reaching a record high according to Westpac.
Australia’s recent inflation data showed that property inflation increased, remaining largely outside the RBA’s control as demand continues to drive up prices.
And then there’s renters.
“Persistent pessimism has continued despite easing fears of further interest rate rises. This has seen a clear lift in the confidence of mortgage holders, up 7.8 per cent in the latest month,” Westpac wrote.
“However, this gain was more than offset by a 6.1 per cent fall in the confidence of renters and a 5.8 per cent fall in the confidence of consumers that own their home outright.”
Westpac’s report also provides insight into the influence of the financial media landscape on public sentiment.
The top five news topics remembered by respondents included news about inflation, budget and tax news, economic news, interest rate coverage, and employment market news.
Clearly, Australians are currently obsessed with their bottom line – though, again, consider the types of demographics who fill out these surveys in the first place.