Tariff chaos drives dip in consumer sentiment
Consumer sentiment slumped to a six-month low in April as US tariffs wreak havoc on share markets and spark global uncertainty.
The Westpac-Melbourne Institute Consumer Sentiment Index dropped 6 per cent to 90.1 in April, falling notably following US tariff announcements.
“Sentiment towards the economy showed a clear tariff-related deterioration,” Matthew Hassan, Westpac’s head of Australian macro-forecasting, said.
“The scale and breadth of tariff increases, which included a 10% tariff on Australian goods, came as a major surprise, triggering a sell-off in global financial markets. With the situation still deteriorating, there is a clear risk of more significant sentiment declines in the months ahead.”
Those surveyed immediately before the tariff announcements had an average consumer sentiment of 93.9, only a slight decline from the March level of 95.9. However, sentiment among those surveyed following the 2 April tariff announcements dipped to 86.6.
The Westpac-Melbourne Institute found that the economic outlook for the next 12 months sub-index fell 5.7 per cent to 90.5, while the sub-index for the next five years fell 3 per cent to 98.4, dipping back into pessimistic territory.
“Sentiment towards the economy showed a clear tariff-related deterioration,” Hassan said. “While neither sub-index is overly weak, the falls speak to a growing sense of unease.”
The family finances versus a year ago sub-index fell sharply to 70.2, the weakest level recorded since the stage 3 tax cuts came into effect in July 2024.
This deterioration in family finances “almost certainly reflects the steep declines in global share markets,” Hassan said, noting that the S&P/ASX200 fell 10 per cent between February and April surveys.
Economic outlook unease has also dampened consumer confidence in the job market, with the unemployment expectations index rising 5.1 per cent to 123.9 in April, Westpac said.
Consumers also felt less confident about the prospect of further interest rate cuts, Westpac found. The Westpac-Melbourne Institute’s index tracking mortgage expectations rose 11.3 per cent to 98.1, and consumers were nearly evenly split on whether interest rates would fall or rise.
However, economists have said that the threat of a tariff-related global economic slowdown could prompt the RBA to deliver faster rate relief.
Hassan said: “Westpac expects the deteriorating external situation, which has had a clear bearing on this month’s weaker sentiment read, and further evidence of a sustained slowing in inflation will see the Board deliver a further 25bp rate cut at its May meeting.”
