After recording the largest weekly rise on record last week following the appointment of Malcolm Turnbull as Prime Minister, the ANZ-Roy Morgan Research consumer confidence index retraced in the week ended 27 September, falling by 3.9 points to 110.6 to be tracking below the long-run average of around 113 (see next chart).
While all sub indices retraced, the sub-index tracking whether now was a good time to buy a major household item fell 3.6% to 118.7, which was the lowest recorded level since May 2009.
Felicity Emmett, co-head of economics at ANZ, believes the reversal in confidence is not surprising after the record bounce last week, and given the inherent weakness across the economy:
“A partial reversal in confidence this week is not surprising given the record bounce in the previous week in response to the appointment of Malcolm Turnbull as the new Prime Minister. While Turnbull’s appointment was greeted with considerable optimism, the challenges facing Australian households remain front of mind and make it difficult to sustain a lift in confidence.
We continue to think that the new government needs to focus on two key planks of economic policy, both medium and long term in nature. Firstly, they need to get the government’s finances in order. Secondly, they need to present a vision for Australia’s economy and reform agenda.
While pursuing these objectives will put the Australian economy on a solid footing in the medium term, it may come at the cost of growth in the short term. Hence, even if business and consumer confidence can build over the coming weeks, we doubt it will be enough to move the dial on the economy. As such, sub-par economic growth and a softening property market will likely see the RBA cut rates further in 2016.”
The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:
Both remain subdued.
