Australians are bracing for a sharp rise in interest rates over the next year, but despite the prospect of increasing borrowing costs businesses are still seeking to hire staff at record levels.
The Westpac-Melbourne Institute consumer sentiment survey for May found more than half of respondents expect interest rates to rise by more than one per cent over the next year.
That compares with around only a third of respondents just a month ago, but comes after the Reserve Bank of Australia last week hiked its key rate for the first time in more than a decade.
Rising interest rates and ballooning inflation saw the survey's confidence index tumble 5.6 per cent to its lowest level since August 2020 - when households were unnerved by Victoria's second wave COVID-19 lockdown.
Aside from the shocks of the pandemic over the past couple of years, the fall in confidence was one of the largest since the coalition's poorly received federal budget in 2014.
Westpac chief economist Bill Evans said the two stunning developments in recent weeks - a spike in inflation to 5.1 per cent and the rise in the cash rate to 0.35 per cent, from 0.1 per cent - have clearly unnerved consumers.
"Having now begun its tightening cycle the board is almost certain to follow up the move in May with a further move in June," Mr Evans said.
The RBA board next meets on June 7.
Other new figures show that despite rising cost pressures, businesses are still eager to employ new staff.
Preliminary data from the National Skills Commission shows online job advertisements jumped by a further eight per cent to 311,100 in April, the highest level of job ads since the series began in January 2006.
Compared to a year earlier, job ads are 33.3 per cent higher, while they are up a massive 84.9 per cent against pre-COVID-19 levels.
Commonwealth Securities senior economist Ryan Felsman said the result bodes well for the April labour force survey due on May 19 - just two days out from the federal election.
CBA Group economists expect about 30,000 jobs were added to the labour force in April, with the unemployment rate potentially falling to 3.9 per cent, the lowest level since September 1974.
Still, credit agency CreditorWatch says that while business activity may have reached a turning point after severe disruptions caused by the pandemic, there are several factors that could yet dampen a more positive outlook.
Aside from looming inflationary pressures and rising interest rates, it warns negative real wage growth, labour shortages, supply-chain disruptions and high fuel prices risk dampening economic growth.
In its monthly business risk survey, it says the real possibility of a hung parliament following the May 21 election will further impact the economic road to recovery.
It warns company insolvencies are predicted to rise across 2022.
CreditorWatch chief economist Anneke Thompson says there are promising signs in the data that businesses are continuing to make a return to pre-COVID levels of activity.
"However, as nearly all central banks around the world have noted, there is still a great degree of uncertainty in economic conditions going forward," she said.
Fitch Ratings has warned the lockdown in China's commercial hub of Shanghai will exacerbate global supply-chain pressures and inflation concerns.
"Restrictions imposed as part of China's zero-COVID-19 policy have led to a plunge in Shanghai freight traffic volume in April and early May," the global credit rating agency said.
"With fewer trucks operating and Shanghai's port staff unable to load and unload ships at their usual pace, significant backlogs have built up at the Port of Shanghai."