Australia consumer confidence falls after RBA hike

That matters because Australian households remain the main engine of domestic demand, and a further rise to 4.85% would push policy to its highest level since 2008. ANZ economist Sophia Angala said core inflation is still likely to remain well above target, meaning the central bank may feel compelled to keep tightening even as confidence weakens.

The survey showed pressure spreading across the consumer outlook. Confidence in current financial conditions fell 8.4 points, expectations for future finances eased 1.9 points and the “time to buy a major household item” subindex dropped 5 points, a sign shoppers are becoming more cautious on discretionary spending.

Inflation expectations also edged higher to 5.9%, reinforcing the RBA’s concern that price pressures are not yet contained. The central bank has also pointed to geopolitical risk, including the Middle East conflict, as a factor that could keep energy and other input costs elevated.

For investors, the combination of weaker sentiment and the prospect of another rate hike is negative for retailers, consumer lenders and rate-sensitive parts of the Australian market. The iShares MSCI Australia ETF, which recently traded below its 50-day average, has also shown weaker momentum as measured by standard technical indicators, including its RSI and MACD readings, suggesting sentiment around Australian equities is softening alongside households.

The next catalyst is the RBA’s November meeting, where markets will be watching whether policymakers prioritize inflation control over the growing drag on spending.