Mortgage-holder confidence sinks to lowest level since 1994

Westpac's consumer sentiment index fell again in November, hitting a four-year low, with pessimism among indebted households the worst in records stretching back to 1994. Confidence in the economic outlook for the year ahead sank to its weakest since August 2020, matching a low last seen during the pandemic.

Matthew Hassan, Westpac's head of economic forecasting, said readings this soft had previously appeared only at the economy's darkest moments: the onset of Covid-19, the height of the GFC, and the recessions of the early 1990s and early 1980s. He drew a line to August 2020, when Melbourne entered its second lockdown just before income support was massively scaled up. 'There is a similar feeling of helplessness now,' Hassan said, pointing to rising fuel prices as something beyond households' and authorities' control.

Households aren't betting on relief. After five rate increases this year, nearly three in four survey respondents said they expect another hike over the next 12 months. Reserve Bank governor Michele Bullock warned last week that the coming year would 'feel like it's a recession', as cost of living pressures drag on weak economic growth.

Markets are moving the other way. According to ANZ data, the implied probability of an RBA rate cut is now above 50% by August next year, and a drop to 4.6% is fully priced in by December 2027. Hassan said Westpac's base case is for rates to start falling from August next year, with no further hikes. A 20% slide in Brent crude has helped fuel the rethink, leaving the global benchmark below $US94 a barrel, down from a post-Iran war high near $US118 in late October.

In Canberra, Anthony Albanese played down talk of tension with treasurer Jim Chalmers, a day after frontbencher Murray Watt told colleagues to stop undermining him. 'The treasurer is doing a great job,' the prime minister said, adding the two were working closely ahead of next month's mid-year budget update, which will include government spending cuts as pressure builds to contain inflation.