Fuel shock sends consumer confidence plummeting to near-COVID low

Australian consumer confidence has plunged, recording its greatest monthly drop since early COVID, as rising fuel prices and a rate hike strain household budgets.

The Westpac-Melbourne Institute Consumer Sentiment Index fell 12.5 per cent from March to April, in one of the sharpest retreats since the pandemic began.

The index measures how families are faring financially compared with a year ago. 

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It also gauges how people feel about their finances and the broader economy in the year ahead and over the next five years, and asks whether now feels like a good time to make a major purchase.

Every component declined, showing across-the-board weakness.

The nosedive comes as petrol prices surge in the wake of escalating tensions involving the US, Israel and Iran.

At the same time, a further 25-basis-point rate hike has compounded concerns about borrowing costs.

The shocks appear to have rattled confidence, with sentiment now hovering near historically weak levels. 

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The latest reading points to a clear pullback in Australians' feelings about their finances.

The most pronounced declines were tied to current financial conditions, with the measure tracking households' feelings about their finances compared to a year ago falling 16.7 per cent – a level typically associated with periods of significant economic stress.

Fuel costs have played a major role, with petrol prices climbing to around $2.40 a litre in early April, jumping 37 cents since the March survey and up 77 cents since early February.

This is the biggest jump in the survey's history and draws comparisons to the 1970s oil shocks.

The data was collected after a temporary fuel excise cut took effect on April 1. This lowered prices by 12 cents per litre, but did little to slow the overall rise.

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