In a country where a home loan is often the central promise of a working life, Australian mortgage holders have arrived at a mood not seen since the bank began measuring it in 1994. Westpac's November survey finds them bracing for a year that the Reserve Bank's governor has already likened to a recession, after five rate rises in a single year have pressed hard on household budgets. Their pessimism echoes the fear of the pandemic, when people felt that events lay beyond anyone's power to steer, even as markets quietly wager that the worst of the rate pressure may ease by the middle of next yea
Mortgage Holders' Confidence Hits 30-Year Low as Households Feel Helpless Ahead of Possible Rate Relief
There is a similar feeling of helplessness now.
Mark
The headline is that mortgage holders are the gloomiest on record. How far back does that record go?
Mimi
To 1994. Indebted households are at their worst reading in that series, and the overall index also hit a four-year low in November.
Mark
Westpac's economist compared it to the pandemic. Why that moment?
Mimi
August 2020, with Melbourne's second lockdown. Hassan says confidence in the year ahead matched that low, and that the feeling then was helplessness, until JobKeeper arrived.
Luke
Careful, though. He also said the economy isn't as bad as during the pandemic. The comparison is about mood, not conditions.
Mimi
Fair. He said "shades of Covid in the responses," which is about how people feel, not a claim the economy looks the same.
Mark
And yet markets expect rate cuts. Why the gap?
Mimi
Oil. Brent fell about 20% from nearly US$118 to below US$94, and investors rethought central bank paths. ANZ data puts the chance of a cut above 50% by August next year.
Luke
Worth noting that's market pricing and Westpac's base case, not a decision. The RBA hasn't promised anything, and respondents themselves expect another hike, nearly three in four of them.
Mark
Does that mismatch matter?
Mimi
It suggests households aren't yet seeing what markets see. Bullock's warning of a year that feels like a recession doesn't help.
Luke
And what the government can do is unclear. The budget update is said to include spending cuts, but we don't know how large.
Le Pouls
- Indebted households have become the most pessimistic in the survey's history, with confidence sliding to a four-year low.
- Nearly three in four respondents expect yet another RBA rate hike within a year, after five increases already this year.
- Confidence in the coming year has fallen to pandemic-era depths, leaving many feeling that they have little control over what happens next.
- Labor is under strain as Treasurer Jim Chalmers faces internal criticism, and the mid-year budget update may bring spending cuts.
- Markets are pricing a likely rate cut from around August next year as oil prices retreat, though households are still bracing for more pain.
In a country where a home loan is often the central promise of a working life, Australian mortgage holders have arrived at a mood not seen since the bank began measuring it in 1994. Westpac's November survey finds them bracing for a year that the Reserve Bank's governor has already likened to a recession, after five rate rises in a single year have pressed hard on household budgets. Their pessimism echoes the fear of the pandemic, when people felt that events lay beyond anyone's power to steer, even as markets quietly wager that the worst of the rate pressure may ease by the middle of next year.
Households with a mortgage in Australia are now more pessimistic about the economy than at any time since Westpac began its consumer sentiment survey in 1994. The November index fell again to a four-year low, and the bank's economists describe a spreading sense of helplessness among the people it surveyed.
Matthew Hassan, Westpac's head of economic forecasting, compares the mood to the darkest moments of recent decades. Sentiment was last this weak in 2022, when inflation approached 8% and the Reserve Bank had lifted borrowing costs sharply. Hassan says he hears "shades of Covid" in what households are saying, with confidence in the year ahead matching its lowest point since August 2020. He notes that much of the pressure, including rising fuel prices, lies beyond the country's control, and that authorities can only cushion so much.
The expectations on interest rates are grim. Nearly three in four respondents expect another hike within a year, a week after Reserve Bank governor Michele Bullock warned that the coming year would feel like a recession.
Financial markets, however, are betting on relief. As global oil prices fall sharply from their late-October peak, traders now expect rates to begin easing around August next year. Hassan's own base case is the same: no further hikes, and cuts from mid-next year.
Politically, the strain shows too. Labor is under pressure over the cost of living, and Prime Minister Anthony Albanese has backed Treasurer Jim Chalmers ahead of next month's mid-year budget update. The households answering the survey, however, are still waiting to see whether relief arrives before the next hike does.
Households carrying a mortgage in Australia are more pessimistic about the economy than at any point since records began in 1994. That is the finding of Westpac's latest consumer sentiment survey, released in November, which showed the overall index sinking again to a four-year low. The bank's economists describe a growing sense of helplessness among respondents.
Matthew Hassan, Westpac's head of economic forecasting, placed the mood in historical context. Sentiment was last this bad in 2022, when inflation was running close to 8% and the Reserve Bank had raised borrowing costs by 4 percentage points over the previous year. Before that, he said, readings this weak had appeared only in the economy's darkest moments: the onset of the Covid pandemic, the height of the global financial crisis, and the recessions of the early 1990s and early 1980s.
Hassan was careful to say the backdrop is not as extreme as it was during the pandemic and its aftermath, but he heard "shades of Covid" in what households told the survey. Confidence in the economic outlook over the coming year fell to its weakest since August 2020, matching a low last recorded during the pandemic. He called that comparison useful, because August 2020 was when Melbourne entered its second lockdown, just before the government massively scaled up income support. People then felt nothing could be done to avoid the pandemic, and that the government could not avoid it either. The JobKeeper measures, he said, comforted many.
He sees a similar feeling now. A substantial portion of what is happening, he argued, is out of the country's control, rising fuel prices among them, and there is only so much authorities can do to cushion Australians from the impact.
The expectations about interest rates are bleak. After five rate increases this year, nearly three in four respondents said they expect another hike within the next 12 months. The survey arrived a week after the RBA governor, Michele Bullock, warned that the year ahead would "feel like it's a recession" because of persistent cost-of-living pressures combined with weak economic growth.
Financial markets, though, are leaning the other way. According to ANZ data, the implied probability of an RBA rate cut passes 50% by August next year, and a reduction to 4.6% is fully priced in by December 2027. Investors have been rethinking central bank forecasts as the global oil price retreats rapidly. Brent crude hit a post-Iran war high of nearly US$118 a barrel at the end of October and has since fallen 20% to below US$94. Hassan said Westpac's base case is that rates begin to come down from August next year, with no further hikes.
The politics are tense as well. Labor is under growing pressure over the cost of living, and a day after the frontbencher Murray Watt urged colleagues to stop undermining the treasurer, Jim Chalmers, the prime minister, Anthony Albanese, said Chalmers is doing a great job. Albanese said he is working closely with him ahead of next month's mid-year budget update, which will include cuts to government spending as pressure builds to contain inflation. He pointed to a treasurer who has produced a couple of budget surpluses, lower deficits and economic reform.
The next markers are that December budget update and whether oil keeps falling. Markets are betting that relief arrives around August, while households are bracing for another hike.
Citations marquantes
There is a similar feeling of helplessness now, and there's only so much authorities can do to cushion Australians.— Matthew Hassan, Westpac head of economic forecasting
The treasurer is doing a great job.— Anthony Albanese, prime minister
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