Bill Evans
The Westpac Melbourne Institute Index of Consumer Sentiment fell by 0.9% from 84.4 in September to 83.7 in October.
Westpac Chief Economist Bill Evans said: “The Index remains in deeply pessimistic territory at a level comparable to the lows briefly reached during the pandemic and the extended weakness experienced during the Global Financial Crisis. The key drags on confidence continue to come from a surge in the cost of living, rising interest rates, and concerns about the near- term outlook for the economy.
Notably, the detail suggests the October result could have been significantly worse if the Reserve Bank had chosen to raise the cash rate by 50bps instead of the 25bp it delivered at its October Board meeting. Markets and the media had conditioned households to expect yet another 50bp move in October, following four consecutive 50bp increases in June, July, August, and September.
The survey of 1200 respondents has been conducted over the four days from October 3 to October 6. The Reserve Bank’s cash rate decision was announced at 2:30 pm on October 4. The interviews are typically conducted in the evening. There were 476 interviews on October 3, which are counted as “pre-RBA” with the remaining 724 counted as “post RBA”.
Sentiment amongst those sampled before the RBA decision showed a depressing 77.4 index read, down 8.3% from the print in September. If this had been the overall result for the month it would have been the second weakest since the early 1990s recession, the only weaker read in recent times being when the pandemic shock hit in April 2020.
Clearly, respondents were extremely concerned heading into another prospective 50bp increase in the cash rate.
Sentiment was considerably better amongst those surveyed after the RBA’s smaller than expected move, with an index read of 88.7, up 14.6% compared to those surveyed on the Monday and 5% above sentiment in September.”
