Mortgage Holders Confidence Crashes to Lowest Since 1994: Westpac
Westpac's November survey showed confidence among Australian households with mortgages at its lowest since records began in 1994. Markets, meanwhile, now see a better-than-even chance of a Reserve Bank rate cut by August 2027, according to ANZ data.
Confidence among Australian households with mortgages has hit its lowest level since records began in 1994, according to Westpac's consumer sentiment survey for November 2026. Mortgage holders' confidence crashes even as financial markets start to price in lower interest rates next year.
The overall Westpac consumer sentiment index fell again in November to a four-year low. Pessimism about the near-term economy deepened.
Echoes of the pandemic
Matthew Hassan, Westpac's head of economic forecasting, said household mood was last this bad in 2022. Inflation then ran close to 8%, and the Reserve Bank of Australia (RBA) had lifted borrowing costs by 4 percentage points over the previous year.
Before that, he said, readings this weak had appeared only in the economy's darkest moments. He named the start of the Covid pandemic, the height of the global financial crisis, and the recessions of the early 1990s and early 1980s.
Confidence in the economic outlook for the coming year was the weakest since August 2020, the survey showed. Hassan said there were "shades of Covid in the responses" from households, though the economic backdrop was less extreme.
"There is a similar feeling of helplessness now," Hassan said. He pointed to rising fuel prices as something largely outside Australians' control.
Rate expectations
After five rate rises this year, nearly three in four survey respondents said they expected another hike over the next 12 months. Indebted households were gloomier still.
Markets see it differently. ANZ data put the implied probability of an RBA rate cut at more than 50% by August next year. A cut to 4.6% was fully priced in by December 2027.
Investors have revised their central bank forecasts as oil prices retreat. Brent crude, the global benchmark, tested nearly US$118 a barrel at the end of October, a high since the Iran war. It has since fallen 20% to below US$94.
"Our base case is that rates do start to come down from August next year, and we don't see any further hikes," Hassan said.
Pressure on Canberra
The survey landed a week after RBA Governor Michele Bullock warned that the year ahead would "feel like it's a recession". She cited persistent cost-of-living pressures and weak economic growth.
Prime Minister Anthony Albanese played down tensions with Treasurer Jim Chalmers on Tuesday. A day earlier, frontbencher Murray Watt had urged colleagues to stop undermining Chalmers.
"The treasurer is doing a great job," Albanese said. He said the government is working on next month's mid-year budget update, which will include cuts to government spending as pressure builds to contain inflation.
