Australian consumer mood bleak in May after surprise rate hike, budget

A measure of Australian consumer sentiment fell in May after a surprise hike in interest rates by the Reserve Bank of Australia (RBA) and a “mildly disappointing” federal budget clouded the outlook for family finances and the economy.

The Westpac-Melbourne Institute index of consumer sentiment out on Tuesday slid 7.9% in May from April, with the index falling to just above the levels seen in March, which recorded the lowest monthly reading since the COVID-19 outbreak in 2020.

“The two key developments over the last month have been the surprise decision by the Reserve Bank Board to lift the cash rate by a further 0.25% in May and the Federal Budget,” Westpac chief economist Bill Evans said.

The index reading of 79.0 for May meant pessimists far outnumbered optimists.

The RBA earlier this month stunned markets with a rate rise rather than an extended pause as was widely expected by traders, saying inflation – sitting at near 30-year highs – was way too high and even higher rates might be needed to bring it to heel.

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