Consumer confidence in Australia has taken a hit, dropping 6% in April to a six-month low of 90.1, according to the latest Westpac-Melbourne Institute Consumer Sentiment Index released Tuesday.
The sharp decline comes amid escalating global trade tensions, with sentiment deteriorating dramatically after US President Donald Trump’s surprise announcement of “reciprocal tariffs” on April 2, which included a 10% tariff on Australian goods.
Westpac’s head of Australian macro-forecasting Matthew Hassan noted that consumers showed “deepening unease about developments abroad,” with a stark difference in sentiment before and after the tariff announcement. Those surveyed before the news reported an index of 93.9, while those surveyed after registered just 86.6 – nearly 10% lower than March’s reading of 95.9.
“The scale and breadth of tariff increases, which included a 10% tariff on Australian goods, came as a major surprise, triggering a sell-off in global financial markets,” Hassan said. “With the situation still deteriorating, there is a clear risk of more significant sentiment declines in the months ahead.”
All five component indexes weakened in April. The “family finances vs a year ago” sub-index plunged 8.5% to 70.2, reflecting the steep decline in global share markets. The ASX200 fell 10% between February and April surveys, while the S&P 500 dropped closer to 16%.
The outlook for interest rate cuts has also dimmed, with consumers nearly evenly split on whether rates will fall or rise. This represents a shift from March, when almost 60% expected rates to be the same or lower in a year's time.
Despite the overall gloom, the federal budget appears to have been a slight positive. The gap between those expecting to be worse off (25%) and those expecting to be better off (15%) narrowed to just 10% – considerably better than the typical 20% negative bias seen in previous years.
Job security concerns have increased, with the Unemployment Expectations Index rising 5.1% to 123.9, though this remains below the long-run average of 129.
Housing market sentiment showed mixed signals. The “time to buy a dwelling” index dropped 6.5% to 85.7, but house price expectations rose 4.7% to a nine-month high of 153.4.
Westpac expects the Reserve Bank to cut interest rates by 25 basis points at its May meeting, given the deteriorating external situation and signs of slowing inflation.
“The board is likely to become much more focused on downside risks to growth than lingering questions about inflation,” Hassan said, noting that the knock-on effect on sentiment will likely weigh on consumer spending.
The survey was conducted between March 31 and April 4, based on responses from 1,200 adults across Australia.
What are your thoughts on this confidence dip? Share your insights below.
