Australian consumer confidence took another hit in the first full week after the Reserve Bank of Australia (RBA) raised its benchmark cash rate to 4.85%, according to a closely watched weekly survey. The ANZ-Roy Morgan index fell 3.1 points to 63.1 in the week of November 2–8, pulling the four-week average down to 66.2.
The drop extends a slide that has left sentiment near historic lows. ANZ economist Sophia Angala noted that the latest reading was the third-lowest since records began in 1973, underscoring how deeply the central bank's aggressive tightening cycle is weighing on household mood.
Mortgage holders feel the squeeze
The survey showed that mortgage holders recorded the sharpest decline in confidence, a pattern that makes sense given how directly the RBA's rate hikes translate into higher monthly repayments for borrowers with variable-rate home loans. For many households, the increase in the cash rate—the rate at which the RBA lends to commercial banks—flows through to mortgage rates within weeks, eating into disposable income.
Consumer confidence is a measure of how optimistic people feel about their own finances and the broader economy. Readings below 100 indicate pessimism, and the current level of 63.1 is far below that threshold, suggesting that most Australians expect tougher times ahead.
The RBA has been lifting rates to combat inflation, which remains above its target band. While higher rates are designed to cool spending and price pressures, they also raise borrowing costs for everything from home loans to credit cards, which can dampen economic activity.
What this means for investors
For everyday investors, a sustained drop in consumer confidence is a signal worth watching. When households feel less secure about their finances, they tend to cut back on discretionary spending—things like dining out, holidays, and new cars. That can hit the earnings of retailers, travel companies, and other consumer-facing businesses.
It can also feed into broader economic trends. Weak confidence often precedes slower consumer spending, which is a major driver of economic growth. If spending falters, the RBA may eventually feel pressure to pause or even reverse its rate hikes, but for now the central bank appears focused on bringing inflation down.
Investors should also keep an eye on how the housing market responds. Mortgage holders are particularly sensitive to rate changes, and a sharp drop in their confidence could signal stress in the property sector. That has implications for banks and other lenders, as well as for construction and real estate companies.
Globally, consumer sentiment has been fragile in many countries as central banks around the world raise rates. In the United States, for example, similar surveys have shown consumers worried about inflation and borrowing costs. The dollar slipped recently as traders braced for key US inflation data, highlighting how rate expectations move markets worldwide.
For Australian investors, the key question is whether this dip in confidence is a temporary blip or the start of a deeper downturn. The ANZ-Roy Morgan index is a weekly snapshot, so it can be volatile. But the fact that it has fallen to near-record lows suggests that the cumulative effect of rate hikes is taking a toll.
Some market watchers will be looking for signs that the RBA might slow its pace of tightening. If inflation data in the coming weeks shows signs of cooling, that could ease pressure on the central bank and provide some relief to consumer sentiment. Conversely, if inflation remains stubbornly high, further rate hikes could push confidence even lower.
For now, the message for investors is to stay alert to how consumer behaviour evolves. Companies that cater to essential needs—groceries, utilities, healthcare—tend to be more resilient in tough times, while those reliant on discretionary spending may face headwinds. As always, diversification and a long-term perspective remain key.
