Westpac's CEO warns that consumer spending is high... thanks to inflation psychology.
👉 Background: Westpac is the second biggest bank in Australia based on total deposits and mortgages. Behind CommBank which is miiiiiiles ahead.
👉 What happened: Now, Westpac has released its full year cash profit and it was down 1 per cent compared to the year before. And the Westpac CEO warned that as the cash rate continues to rise, more businesses and retail customers will start to feel the pain.
👉 What else: The irony right now is that inflation psychology is actually keeping consumer spending high...which keeps inflation high...which keeps the cash rate rising.
💡Inflation psychology is the idea that consumers respond to rising prices by buying even more now. That’s because we think prices are going to go up even more in the future.
💡The irony of inflation psychology is that it's a self-fulfilling prophecy. When we buy in bulk, we're actually contributing to artificially pushing up prices in the future.
💡The Governor of the RBA has previously warned that it's in our national interest to avoid inflation psychology and now Westpac’s CEO is joining the party.
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