Australia’s consumer sentiment index fell to its lowest level in 21 months in May. High inflation and rising interest rates have put downward pressure on household finances and spending targets.
The consumer sentiment index fell by 5.6% in May and by 20.1% year-on-year.
„Two stunning developments are clearly unnerving consumers. Firstly, on April 27, headline inflation was reported to have lifted above 5% for the first time since 2007. Then, on May 2, the Reserve Bank raised the cash rate for the first time since 2010,“Westpac Chief Economist Bill Evans said.
The RBA voted to raise the policy rate by 0.25% to 0.35% and warned that further rate hikes may be needed to combat rapidly rising inflation. This increase in borrowing costs is complemented by price pressures in oil, housing and food. As a result, the household financial conditions index for the next 12 months fell by 11.2% in the survey.