Consumer confidence down after Westpac interest rate rise announcement: Roy Morgan

According to research by Roy Morgan, consumer confidence has fallen 2.0% in the wake of Westpac’s announcement to increase its standard variable interest rates for both owner occupiers and investors by 0.20%. The drop follows a growth in consumer confidence of 5.1% in the previous week.

Westpac has lifted its variable home loan interest rates in a bid to meet restrictions by APRA that require Australian banks to increase their capital by 16% to at least 25% by July 2016.

According to Domain Group dropping consumer confidence levels due to Westpac’s move to increase variable rates lead to slowing auction clearance rates in both Sydney and Melbourne over the weekend.

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In a statement Roy Morgan said Westpac’s decision to increase home loan rates, combined with slowing momentum in the property market is likely to be the reasons for the confidence drop.

“The fall in ANZ-Roy Morgan Australian Consumer Confidence last week was likely driven by deteriorating sentiment about the outlook for the housing market,” explained ANZ Co-Head of Australian Economics Felicity Emmett.

Emmett said she expected the decline in property sector confidence to affect residential prices and construction. “A softer housing market is likely to weigh on consumer confidence, economic growth and employment.”

"Housing has been a key pillar of growth this year, and without that support in 2016, we expect the economy will need further stimulus in the form of another 50bps of rate cuts from the RBA. While the focus is turning to the November RBA board meeting, we continue to expect the Bank to wait until February to change policy settings.”

The research by Roy Morgan also revealed the overall outlook of economic conditions over the next five years has dropped by 3.1%.

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