rates

Australian consumers are showing real signs the largest and longest rate hiking cycle in 30 years is starting to bite. It might be the proof the RBA needs to see that its fight against inflation is working, adding further weight to the theory that rate rises are behind us.

Bill Evans, who will step down next year after three decades as Westpac’s chief economist, says “deeply pessimistic” consumer sentiment despite the RBA’s recent pause is a sign of further hikes ahead.

They can either tighten policy to squash inflation or ease to prevent financial contagion, but there’s no right answer for central banks according to Ruffer’s Duncan MacInnes.

Green shoots of relief from central banks will take some time to filter into the economy due to a confluence of factors according to Sage Capital.

With inflation, interest rate hikes and other economic stress weighing heavily on Australian households, key recent data show consumer sentiment approaching new lows while overall spending continues to climb.

More rises are likely to come but analysts say a confluence of factors may cap the official rate at around 3.1 per cent in 2023, providing relief to Australian households.