According to the Westpac-Melbourne Institute Index of Consumer Sentiment for February, only 16% of Australian adults think rates will fall over the year.
This is at odds with institutional economists' forecasts, with most predicting the Reserve Bank of Australia (RBA) will rate cut to 0.50% in April.
Only three economists out of 25 looking for a February cut from the #RBA with a consensus call being an April move with a significant spread of expectations through the year #ausbiz pic.twitter.com/muuucjHKoC
— Alex Joiner (@IFM_Economist) January 31, 2020
The figure is even lower than what it was in August 2019 when 22% expected rate cuts over the next year.
The report also showed overall sentiment among Australian consumers rose 2.3% from 93.4 in January to 95.5 in February.
Despite the uptick on the month, the Index remains well below the 'long run' average of 101.4, where a reading below 100 indicates pessimists outnumber optimists.
Compared to a year ago, overall sentiment is down 8% - 103.8 in February 2019, compared to 95.5 in February 2020.
The report outlined several reasons for the pessimistic outlook, with bushfires, family finances, and the housing sentiment as major drivers.
Miserable Millennials
Overall sentiment among 18-24 year olds' fell by 5.2% in February while 25-44 year olds' sentiment fell by 5.5%, at 21 month and 2.5 year lows respectively.
This is a phenomenon the CommSec has termed the 'Miserable Millennials'.
"The ‘smashed avocado’ generation aren’t happy," CommSec senior economist Ryan Felsman said.
"Altered aspirations around housing affordability could be a key factor."
Aussie consumers’ house price expectations rose to the highest level since March 2017, up 73% from a year ago in February.
"The impact on first home buyer loan demand - currently representing a very healthy percentage of all owner occupier commitments (excluding refinancing) in December - will be something to watch as home prices continue to surge in the big cities," Mr Felsman said.
Meanwhile, the 'right time to buy' a home sub-index fell 5.6% to 112.1, reflecting the recent surge in house prices around the country.
In December 2019, home loan lending accelerated to its highest level since July 2018, with the monthly value of new home loan approvals rising 4.4%.
After three RBA rate cuts in the second half of 2019, the value of home loan lending soared 20.7% from May 2019, driven mostly by owner-occupier lending (up 22.8%).
The value of lending to first home buyers in December was up 38% on the year.
What does all this mean for the overall economy?
Consumer confidence is a major driver in the overall economy, and can affect spending habits and overall home ownership participation - a major part of the Australian economy.
Mr Felsman said consumers remain cautious.
"Negative newsflow around the bushfires, floods and Novel Coronavirus are adding to long-standing worries about the economy, household finances and job security," Mr Felsman said.
"The Aussie dollar hit 11-year lows this week - perhaps weighing on overseas travel plans."
This is despite overseas debit card spending hitting historic highs in December, even after accounting for the holiday season busy period.
The Westpac-Melbourne Institute Index of Consumer Sentiment report is released every month, and was first undertaken in 1973 as a quarterly survey.
The table below displays a selection of variable-rate home loans with some of the lowest interest rates on the market.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.08% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 Star Customer Ratings |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% | Apply in minutes |
| Promoted | Disclosure | |||||||||
6.09% p.a. | 6.11% p.a. | $3,027 | Principal & Interest | Variable | $0 | $250 | 60% |
| Promoted | Disclosure |
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