Consumer confidence in Australia plummeted in April to its lowest level in six months, as United States President Donald Trump’s sweeping tariffs measures and the resulting equity market slide rattled households across the country.
The Westpac-Melbourne Institute Consumer Sentiment Index fell 6% to 90.1 in April, reflecting broad unease about the economic outlook.
Matthew Hassan, Head of Australian Macro-Forecasting, noted that the unexpected scope of the tariff hikes - including a 10% levy on Australian goods - shocked markets and sparked a global sell-off, raising the risk of deeper sentiment declines in the coming months.
The decline was most pronounced among older Australians, whose exposure to falling markets - particularly through superannuation holdings - has left them more vulnerable.
Matthew Hassan explained: "The sub-group detail shows bigger declines across older age-groups that would have more exposure to the market decline, particularly through superannuation holdings."
The tariff-induced economic shock appears to have dampened expectations for monetary easing as well. The Westpac-Melbourne Institute Mortgage Rate Expectations Index rose sharply, increasing 11.3% to 98.1.
"Certainly, consumers as a whole are less confident about the prospect of further interest rate cuts," Hassan added.
Despite ongoing economic headwinds, the Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.1% last week after having eased rates in February for the first time in four years. Governor Michele Bullock cited the nation’s resilient labour market, noting unemployment remains near historical lows.
However, financial markets are now fully pricing in four RBA rate cuts this year, with the RBA Rate Tracker indicating a 96% chance of a larger-than-usual 50 basis point (bp) reduction in May.
More broadly, sentiment over the economy has continued to erode.
"The ‘economic outlook, next 12 months’ sub-index fell 5.7% to 90.5. The ‘economic outlook, next 5 years’ sub-index also declined 3% to 98.4, dipping back into ‘net pessimistic’ territory. While neither sub-index is overly weak, the falls speak to a growing sense of unease," said Hassan.
Westpac expects that this mounting anxiety, paired with signs of slowing inflation, will spur the RBA to act at its next monetary policy meeting.
"The Reserve Bank Monetary Policy Board meets on May 19-20. Westpac expects the deteriorating external situation, which has had a clear bearing on this month’s weaker sentiment read, and further evidence of a sustained slowing in inflation will see the Board deliver a further 25bp rate cut at its May meeting.
"Indeed, given the scale of the tariff shock unfolding abroad and signs that the knock-on effect on sentiment will weigh on consumer spending, the Board is likely to become much more focused on downside risks to growth than lingering questions about inflation."
In a separate release on Tuesday, National Australia Bank's Monthly Business Survey also showed continued caution.
While business conditions remain close to average levels, confidence stayed in negative territory and well below long-term norms.
“Business conditions remain a little below average,” noted NAB Chief Economist Sally Auld. “In trend terms, conditions remain strongest in the services sector and weakest in manufacturing and retail."
“Businesses remain cautious about the outlook, with confidence and conditions both below average. We will be looking to see how recent tariff announcements flow through to business sentiment in upcoming surveys,” Dr Auld added.
