Australian mortgage borrowers’ confidence falls to lowest level since 1994 — The Guardian

In Australia, confidence among households with mortgages has fallen to its lowest level since records began in 1994. The Westpac consumer sentiment index dropped to a four-year low in November amid worsening expectations for the economy’s near-term outlook, The Guardian reports.

Household sentiment

Westpac’s head of economic forecasting, Matthew Hassan, noted that household sentiment was last this weak in 2022. At that time, inflation in the country was approaching 8%, while the Reserve Bank of Australia had raised borrowing costs by 4 percentage points over the previous year.

According to Hassan, similarly low readings were previously recorded at the start of the COVID-19 pandemic, during the global financial crisis, and during recessions in the early 1990s and 1980s. Expectations for the economic situation over the next 12 months have become the worst since August 2020.

The economist linked the current sentiment to a feeling of helplessness. In his view, it is intensified by factors that are largely beyond the control of households and authorities, including rising fuel prices.

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Rates and budget

Reserve Bank of Australia Governor Michele Bullock said a week before the survey was published that next year could feel like a recession because of persistent cost-of-living pressure and weak economic growth. After five rate increases this year, nearly three-quarters of survey respondents expect another increase over the next 12 months.

At the same time, financial markets have begun pricing in the possibility of a rate cut from the middle of next year. According to ANZ, the probability of such a move by August next year exceeded 50%, while a rate cut to 4.6% was fully priced in by markets for December 2027. Investors are also revising their expectations after the Brent price fell by about 20% — from nearly $118 a barrel at the end of October to less than $94.

Australian Prime Minister Anthony Albanese said he was working with Treasurer Jim Chalmers on the upcoming mid-year budget update. According to him, the document will provide for cuts in government spending amid pressure to curb inflation.