(Bloomberg) -- Australian consumer sentiment tumbled the most since 2020 while business confidence also nosedived as soaring fuel prices coupled with higher interest rates triggered dramatic falls in both readings.

Consumer sentiment plummeted 12.5% to 80.1 points in April, Westpac Banking Corp. said in a statement on Tuesday. Near-term expectations dropped back to 2022–23 lows that were last seen during the post-Covid “cost of living” crisis.

“A sharp deterioration in expectations suggests consumers are bracing for a return to the extended period of weakness seen during the 2022–24 inflation fight,” said Matthew Hassan, Westpac’s head of Australian macro-forecasting. “The April sentiment drop is the biggest monthly decline since the onset of the Covid pandemic.”

The survey also showed that consumers are now more worried about losing their job than during 2022-23’s rate hike cycle. Separate figures from National Australia Bank Ltd. showed business confidence crashed 29 points in March, the second-largest monthly fall in the survey’s history.

Together, the data point to a sharp slowdown in household spending ahead and highlight the growing downside risks to Australia’s economy if the Iran conflict drags on. The Reserve Bank has already raised rates twice this year and money markets are pricing a decent chance of a third consecutive hike next month.

“Given the double whammy of rate hikes and surging fuel costs, we are likely in for another round of per-capita consumption recession in the next few months,” said My Bui, Sydney-based economist at AMP Ltd. “The takeaway from today’s suite of surveys is that it will be rather tough times ahead for both consumers and businesses.”

The sharp declines suggest Australia “faces a demand and supply shock simultaneously that threatens to put the economy into stagflation,” Citigroup Inc.’s Faraz Syed and Josh Williamson said.

“With the economy needing tighter monetary policy even prior to the conflict, the inflation narrative suggests even more urgency for the RBA to tighten policy and reduce inflation expectations,” the economists said, predicting another two hikes for a terminal rate of 4.6%.

Earlier on Tuesday, Qantas Airways Ltd. said its fuel costs have surged, forcing it to reduce domestic capacity to cope with the fallout from the Iran war. Separately, Westpac said in an exchange filing it would increase its provisions for bad loans as it prepares for potential losses among energy-intensive businesses squeezed by higher fuel costs.

Tuesday’s reports also showed:

The ‘family finances vs a year ago’ sub-index plunged 16.7% to 66.8, Westpac said The Westpac–Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, rose 3.9% to 177.2 in April, returning to recent highs The ‘time to buy a major item’ sub-index dropped 15% to 83.3 NAB’s survey showed business conditions, which measures sales, profitability and employment, declined 1 point to 6 index points The relative resilience of conditions “highlight that the economy had carried a healthy level of momentum heading into the unfolding shock,” NAB said Capacity utilization rose marginally, unwinding some recent easing Forward orders fell 7 points to -1 index points, erasing the gains made so far in 2026 Purchase cost growth in quarterly terms more than doubled to 3% and product price growth rose to 1.1%

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