Oz Consumer Confidence Crashes as Tariff Turmoil Rattles Households

The index dropped by 6% in April, falling from 95.9 to 90.1, marking a sharp retreat driven by the new reciprocal tariffs announced by US President Donald Trump.

The survey, conducted in early April, shows a stark 10% drop in sentiment among respondents surveyed after the tariff announcement.

“Consumers are showing deepening unease about developments abroad,” said Matthew Hassan, Head of Australian Macro Forecasting at Westpac. “Sentiment weakened sharply over the course of the survey week, with steep falls following the US tariff shock on April 2.”

The tariffs, which include a 10% impost on Australian goods, sent ripples through global financial markets. The S&P/ASX 200 index dropped 10% between February and April, with US markets faring even worse. Westpac analysts warn that if the current trajectory continues, confidence could dip even further in coming months.

Key Data Highlights:

• Family Finances (vs a year ago): Down 8.5% to 70.2 – the lowest level since mid-2024.
• Economic Conditions (next 12 months): Fell 5.7% to 90.5.
• Time to Buy a Major Household Item: Dropped 7.3% – now sitting at 78.7.
• Unemployment Expectations Index: Up 5.1% to 123.9 – indicating more consumers expect job losses ahead.
• Interest Rate Expectations: Jumped 11.3% to 98.1 – reflecting a split in views over whether the RBA will continue rate cuts.

While the Reserve Bank of Australia held interest rates steady at its April meeting, expectations are shifting. Traders are now betting on up to four rate cuts in 2025, with a potential 50bp move as early as May, as the RBA weighs global risks and faltering sentiment.

“Consumers are clearly less confident that the RBA will continue to cut,” Hassan said. “The shift in interest rate expectations underscores growing uncertainty about the policy outlook.”

There was a slight glimmer of optimism from the Federal Budget. Westpac’s budget-related sentiment question showed a narrower gap between those expecting to be better off (15%) and worse off (25%) – the smallest gap since 2023. Still, the budget was not enough to offset growing fears around the economy.

The housing market remains a mixed bag. While sentiment around buying a home slumped 6.5% to 85.7, expectations around house prices jumped 4.7% to 153.4 – a nine-month high.

Interestingly, regional differences are stark: sentiment remains neutral in Sydney and Melbourne but has fallen sharply in Queensland and WA.

With inflation moderating and global growth risks mounting, Westpac expects the RBA to deliver another 25bp rate cut at its May meeting. Hassan cautions that with consumer sentiment taking a hit, spending is likely to soften, and growth forecasts could be revised lower.

“We’re now seeing sentiment being directly impacted by international events,” he said. “It’s a clear reminder that global shocks can ripple quickly into Australian households.”