Overall, Australian households are feeling the squeeze, with current finances down sharply and willingness to buy big-ticket items slipping, signaling deteriorating consumer conditions.

Near-term sentiment weakened to levels seen during the 2022-23 cost-of-living crisis, suggesting households expect prolonged financial strain and weaker economic momentum over the year ahead.

Analysts warn the combination of weak demand and tight supply could push Australia toward stagflation if the shock persists and inflation remains elevated.

Westpac said it will bolster provisions for bad loans as energy-intensive businesses face higher fuel costs and potential losses.

The Reserve Bank of Australia is scheduled to meet in early May, with markets pricing in another rate hike and pricing in broader tightening into the second half of the year.

The Westpac Mortgage Rate Expectations index rose, signaling expectations of higher variable mortgage rates over the next year alongside the anticipated May meeting.

Unemployment expectations rose to the highest level in more than five years outside the pandemic period, underscoring rising job market concerns.

NAB data show negative sentiment broadly across states, though most regions still reported positive business conditions.

Qantas cited higher fuel costs prompting a reduction in domestic capacity, illustrating energy costs weighing on the economy.

The decline is driven by higher fuel prices and expectations of further monetary tightening, with a large share of respondents expecting higher mortgage rates in the next year.

Analysts warn of a sharp slowdown in household spending and increased downside risks if geopolitical tensions persist and fuel costs stay elevated.

Medium-term outlook remains relatively resilient, but households face growing financial pressure from energy costs and interest rates, potentially weighing on spending and growth.