Australian Consumers Are Happy After Pause In RBA Rate Hikes - Westpac
A recent survey reveals that consumer sentiment in Australia improved during April. This came after the central bank of Australia paused its cycle of a rate hike amid signs of peaking inflation.
According to Westpac, the Melbourne Institute Consumer Sentiment Index was recorded at 85.8 after a jump of 9.4% during April. However, the expectation was only for an increase of 1.5%.
In simple words, consumer sentiment in Australia has increased at a much faster pace than market expectations! In fact, the current pace is one of the fastest since 2020, considering it recovered from record lows!
RBA Decides To Leave Interest Rates Unchanged
According to experts, this recovery can be traced back to the RBA's decision not to change the interest rates. In addition, another sector that enjoyed this RBA decision was the mortgage holders!
Last week, the RBA decided to keep its interest rates steady and said it wanted to wait for a period of time to see the full effects of the interest rate hikes.
In simple words, the RBA wants to take a step back and see how the recent rate hikes have affected the economy. It appears that the RBA view is that it takes time to view the effect of the rate hikes!
The RBA decision is coming at a time when inflation is showing signs of peaking after reaching a 30-year high for two straight months.
This is an indication that the price pressure in Australia has peaked amid a slowdown in economic growth and high-interest rates.
However, Westpac believes not everything is alright with the recent survey of consumer sentiment. According to Westpac, consumer sentiment in Australia is still weak.
In fact, Australian consumer spending will most likely remain muted for the next 1.5 years (till mid of 2024). And in the RBA May meeting, there's a high chance of a rate hike as well.
Similarly, Philip Lowe has also made it clear that rate hikes are directly tied to high inflation.