Australia’s sentiment plunges

Australian consumer sentiment fell 12.5% in April to 80.1, its weakest reading in two and a half years. The Westpac–Melbourne Institute index dropped from 91.6 in March, after a survey period that overlapped with a fresh fuel-price shock and the Reserve Bank of Australia’s March rate increase. Westpac economist Matthew Hassan said households were being hit by another cost-of-living shock. The Reserve Bank lifted the cash rate by 0.25 percentage points on March 16, taking it to 4.1%, its second increase in two months. The bank said the move came as the Middle East war pushed up oil, gas and petrol prices. Reserve Bank deputy governor Andrew Hauser said on April 14 that stagflation is a “central banker’s nightmare,” because inflation can rise while economic activity slows. He said Australia faces a “big income shock” from the Middle East war and that the bank is watching how the energy shock feeds into growth and prices over the next two to three years. Stagflation means households pay more even as the economy loses momentum, leaving central banks with no easy lever to pull. The Reserve Bank’s formal inflation target is 2% to 3%, but the bank’s website shows annual consumer inflation was 3.7% in February 2026. Westpac’s April survey showed the pain was broad, not just a headline drop in confidence. Household finances compared with a year earlier fell 16.7% to 66.8, the “time to buy a major household item” measure slid 15.0% to 83.3, and job-loss fears rose 9.7% to 147.8, a five-and-a-half-year high. The March reading of 91.6 had been the first monthly rise since November, but it still sat below 100, the level where optimists and pessimists are evenly balanced. April’s fall pushed sentiment further below that line. The next test comes on May 4-5, when the Reserve Bank board meets again with consumers already more downbeat and energy prices still feeding through the economy. Hauser said the coming months would be challenging for Australia.