Australian consumer sentiment near record lows in June - Westpac

Investing.com -- Australia’s consumer sentiment improved slightly in early-June, a private survey showed on Tuesday, but remained close to record lows amid pressure from rising interest rates and inflation.

A big jump in the minimum wage over the past month somewhat helped improve sentiment after it tumbled to COVID-era lows in May.

The Westpac Consumer Sentiment index rose 0.2% in June, slightly better than expectations for the index remaining unchanged after a 7.9% tumble in May. Westpac said that survey responses had been largely optimistic before the Reserve Bank of Australia’s rate hike on June 6, but had then soured after the hike.

Sentiment still remained largely strained as consumers cut back on spending in the face of rising interest rates and high inflation. June’s hike was the second surprise interest rate hike by the RBA in two months.

The Westpac survey was conducted just after the Fair Work Commission increased the minimum wage by 5.75%, offering some relief to consumers.

But the RBA signaled that rates will likely increase further as the bank struggles to bring down inflation. Economic conditions are also expected to worsen as the bank carries out its monetary tightening.

The Australian economy barely expanded in the first quarter of 2023, recent data showed, as a post-COVID economic rebound ran out of steam and as the effects of high interest rates and inflation began to be baked into the economy.

Consumers turned sour over the jobs market, which has otherwise remained a key bright spot for the Australian economy so far this year. But the RBA warned that the market will deteriorate as interest rates rise further, with unemployment expected to shoot up from near 50-year lows.

Sentiment towards the housing market continued to worsen, as homeowners were squeezed by rising mortgage rates and as rents continued to rise.

Consumer expectations for unemployment also shot up, reversing a trend seen over the past year as the labor market cooled from a post-COVID rebound.