(Bloomberg) -- Australian consumer sentiment tumbled this month as Russia’s invasion of Ukraine, flooding in the nation’s northeast, rising prices and the prospect of higher interest rates spooked households.
The consumer confidence index dropped 4.2% to 96.6 points in March, Westpac Banking (NYSE:WBK) Corp. said in a statement Wednesday. That’s the weakest result since September 2020, which was also the last time the index fell below the 100, the level indicating that pessimists outnumber optimists.
“The war in Ukraine; the floods in southeast Queensland and northern NSW; ongoing concerns about inflation and higher interest rates were all likely to impact confidence, although the size of the decline is still notable,” Westpac Chief Economist Bill Evans said.
A special question on recollections from recent news coverage showed inflation “has really exploded,” Evans said. A year ago, just 8.6% of respondents recalled news on inflation. That soared to 38.7% in March, a 14-year high, he said.
Reserve Bank Governor Philip Lowe earlier Wednesday acknowledged that elevated inflation was likely to be prolonged by the war in Ukraine and added that it was “plausible” that rates will rise later this year. He said the flooding in northeast Australia was likely to cause a spike in fruit and vegetable prices, though policy makers would look through the temporary increase.
Westpac is sticking to its view that the RBA’s first rate hike will come on Aug. 2, following two more quarterly inflation reports in April and July.
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