Data released by Westpac Banking Corporation and the Melbourne Institute showed that consumer sentiment in Australia worsened in July, reaching a 6-month low, as concerns about a possible increase in borrowing costs offset the positive from the prospect of tax cuts and government relief on power bills.
The consumer sentiment index fell 1.1% to 82.7 points after rising 1.7% in June. It was the fifth time of decline so far this year. The index has held below 100 since March 2022.
The Reserve Bank of Australia kept rates unchanged at the June meeting, but warned of the risks of higher inflation, which may require further tightening of monetary policy. The survey showed that the share of respondents expecting an increase in mortgage rates in the next 12 months rose to almost 60% from 48.3% in June. As a result the survey's measures of family finances both dropped sharply, overwhelming a small improvement in the economic outlook.
Meanwhile, separate data showed that the NAB business confidence index rose to 4 points in June from -2 points in May. It was the highest level since January 2023. However, business conditions, which measure sales, employment and profitability, eased 2 points to 4, below their long-run average.