Consumer confidence among Australian households has crashed, leaving the country with one of the gloomiest outlooks about the economic situation, new research shows.
Data from the Organisation for Economic Co-operation and Development (OECD), reported by The Australian Financial Review on Monday, shows Australian consumer confidence dropped 1.1 index points over the 12 months to September.
Only Chile and Belgium recorded sharper declines in household outlooks for their finances, the economy and jobs.
The research reinforces the view of many economic experts that lingering inflation and successive interest rate hikes were battering household budgets, with little sign the cost of living crisis will improve.
Inflation isn’t expected to return to the middle of the Reserve Bank of Australia’s target band (2 per cent to 3 per cent) until March 2028.
It leaves Australia with one of the highest rates of cost of living among global advanced economies.
The International Monetary Fund has projected Australia’s inflation to be the fifth-highest in the developed world at 3.9 per cent in 2026 – behind Iceland at 5.6 per cent, Israel at 4.5 per cent, Greece at 4.2 per cent and New Zealand at 4.1 per cent.
More gloom was heaped on the economy last week when ABS data showed almost 40,000 Australians fell out of work in September, tipping unemployment up to 4.7 per cent.
The labour market has held up well in recent years, sitting at historic lows, and the latest rise was a big shock.
It’s another blow for households already dealing with interest rates sitting at a 15-year high.
Australia has been hit by four interest rate rises this year, the most recent in September, pushing the official cash rate target to 4.60 per cent, a figure not seen since 2011.
The softening jobs market may give the Reserve Bank enough breathing room to stave off a fifth rate hike before Christmas when its board meets in November.
But most the big four banks are not expecting relief for borrowers to arrive until 2027.
Commonwealth Bank and Westpac say they expect the first interest rate cuts to come in August next year, while ANZ believes interest rates could fall to 3.85 per cent at the end of the year.
The negative outlook by Australians was hammered home last week when the Committee for Economic Development of Australia (CEDA) released its “misery index”.
The analysis found it was back near its post-pandemic highs, and little relief is expected before the end of 2028.
“Households have been squeezed from two sides this year, with prices and mortgage repayments both rising,” said CEDA head of economics Liam Dillon.
“A resilient jobs market has been the main thing holding many families together.”
