Westpac's consumer confidence index fell 2.7% in November to 78.2 points, reaching its lowest level since late 2022. Notably, among mortgage borrowers, the index plunged 11.6% to 68.1 points — the lowest on record since observations began in 1994. Rising fuel prices, a pickup in headline CPI to 4.3% and the fifth rate hike of the year created a combination that left highly indebted households as the most vulnerable link. It is telling that 72% of respondents surveyed after the Reserve Bank of Australia meeting expect further increases in mortgage rates over the next 12 months, which by itself becomes a constraint on consumption regardless of the central bank's actual actions.
NAB's October survey recorded a further deterioration in business sentiment. The confidence index fell one point to -15 and the conditions index to -2, with the weakest dynamics shown by the forward-orders component, which collapsed 11 points to -12. This broad-based decline was led by construction and manufacturing. For the RBA, this report confirms the narrative voiced in the November Monetary Policy Statement — the economy is slowing but continues to operate near capacity limits, which sustains supply-side inflationary pressure.
The composite PMI fell to 48.2 from 51.3 a month earlier, decisively crossing the 50 threshold that separates expansion from contraction, and the services sector, which had been the economy's last pillar for much of the year, also joined the downward trend. This result aligns with the picture painted by the NAB and Westpac surveys — households are cutting spending under pressure from higher living costs and debt servicing, and businesses are responding to weaker demand by reducing orders and hesitating on investments.
The RBA rate has reached 4.85%, and most economists agree the RBA will pause, with the risk of another hike if inflation continues to rise. The RBA expects GDP growth to remain below potential over the entire forecast horizon. CBA takes a more pessimistic view: the bank's economists forecast annual growth slowing to 1% by mid-2027 — well below the RBA's 1.6% projection — before recovering to 2.1% by the end of 2028. This is not yet a recession, but if the negative trends continue in the coming months, forecasts will inevitably be revised downward.
Speculative positioning in AUD changed little over the reporting week, with a net short position of -9.07 billion and the implied price trajectory moving up.
The AUD/USD pair tested support at 0.6868 but failed to close below it. Long-term factors do not give grounds to expect a sustained rise in the Aussie, but short-term drivers, especially geopolitical ones, could work in its favor. We believe another wave of declines is unlikely in the near term; the pair is highly likely to return toward the mid 0.6960/70 area.