Australian households are weighing rising fuel costs against broader signs of economic resilience, with two new ANZ-Roy Morgan readings pointing in different directions for the outlook borrowers and property investors face over the coming months.
Weekly inflation expectations reached 6.1% for the week of August 17-23, up 0.5 percentage points from July, reversing a months-long decline as government support for fuel prices was wound back. The increase followed cuts to the petrol and diesel fuel excises being wound back in early July and ending entirely in early August.
Average retail petrol prices increased by five cents a litre to over $1.70 per litre in July, and have continued climbing since.
Roy Morgan CEO Michele Levine (pictured left) said the shift has been rapid: "since the fuel excise cut begun to be wound back, average retail petrol prices have rocketed higher, up by over 40 cents per litre since late June and now averaging over $2 per litre so far during the month of August."
Levine also flagged the flow-on risk for monetary policy, noting the recent petrol price spike "is putting renewed pressure on inflation estimates and putting the prospect of additional interest rate increases by the RBA back in focus in the months ahead," with the Reserve Bank due to meet again in late September.
Consumer confidence lifted to 77.5 in late August, its highest level since the Iran War began in late February, though still below year-ago levels.
ANZ economist Sophia Angala (pictured right) said the reading "continued its grind higher," attributing the lift to an improvement in the financial conditions subindices and households' views on whether it was a good time to buy a major household item.
Angala noted a separate trend running alongside that improvement: "inflation expectations rose for a third consecutive week... this may be linked to the recent rise in fuel prices."
One trend of particular interest to brokers: confidence among renters has now outpaced both outright homeowners and those still paying off a mortgage for eight consecutive weeks.
Angala said confidence "amongst renters is at its highest since January," while sentiment "amongst those paying off a mortgage is at its highest since March."
For brokers advising first-home buyers and property investors, the data points to improving sentiment among mortgage holders, even as inflation pressures complicate the near-term outlook for mortgage rates.
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