WATCH: what confidence means for rates

Declining consumer confidence levels, alongside weaker-than-expected consumer spending, suggest the Reserve Bank of Australia is unlikely to be gearing up for another rise in the official cash rate any time soon, according to ANZ Economist Sophia Angala.

In February, the Reserve Bank of Australia hiked interest rates by 0.25 basis points to 3.85 per cent, in line with market expectations. In its first reading since that decision, the ANZ-Roy Morgan Australian consumer confidence index hit its lowest point since December 2023.

Confidence fell to 80.5 points, well below the neutral level of 100, and to levels unseen since the aftermath of the last RBA rate-rising cycle. The four-week moving average fell to 82.1 points.

Speaking to ANZ Institutional Insights on video, Angala said the result, as well as weaker than expected household spending in December, supported ANZ Research’s forecast of no further rate rises in 2026.

“Overall, with that slowing pace of household disposable income growth, alongside a weaker consumer sentiment as well, it does support our view that last week's RBA rate hike is going to be the only move for the cash rate this year,” she said.

“And we continue to expect the RBA on an extended hold at 3.85 per cent in the near term.”

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All the subindices in the ANZ-Roy Morgan Australian consumer confidence index recorded a decline, led by falling confidence among households.

“Most notably, household confidence in the economic conditions over the next five years is now at its lowest level in over 25 years,” Angala said.

Earlier in February, data from the Australian Bureau of Statistics showed household spending fell 0.4 per cent in December 2025. Markets had expected a rise.

Angala said it was important to consider the context of the decline.

“That fall in December is following two strong prints in October and November, respectively, where both of those months saw monthly growth of at least 1 per cent,” she said.

Still, the short-term direction of consumer spending, as well as confidence, is likely to be influenced by concerns around interest rates, Angala said.

“Looking forward, we do expect the pace of consumer spending growth to slow from here,” she said.

“Given the recent pickup in inflation, and also last week's RBA rate hike our ANZ Roy Morgan consumer confidence series has also been running at a subdued level so far into 2026. And the impact of the RBA rate hike is also likely to continue to flow through to consumer sentiment over the next couple of months.”

The next ANZ-Roy Morgan Australian consumer confidence reading will be released on February 17.