Rate cut confidence boost evaporates

Late yesterday Roy Morgan released its weekly consumer confidence numbers, showing  another small drop on the week, enough to return the index practically to where it was before the November and December rate cuts:

Consumer Confidence is at 110.3pts (down 3.2pts in a week), according to the Roy Morgan Consumer Confidence Rating conducted last weekend (March 3/4, 2012). Consumer Confidence is now 5.2 points lower than a year ago, March 5/6, 2011 (115.5).

Consumer Confidence has fallen considerably with increasing concern about all components of the survey, especially personal financial situations.

Australians are less confident about their personal finances over the next 12 months with 22% (up 5%) saying they expect their family to be ‘worse off’ financially while 37% (unchanged) expect to be ‘better off’.

Now 34% (up 4%) of Australians say their family is ‘worse off’ financially compared to a year ago while 29% (up 2%) say their family is ‘better off’ financially.

More Australians are worried about Australia’s economy over the long-term with 22% (up 2%) of Australians expecting Australia to have ‘bad times’ economically over the next five years compared to 33% (down 2%) that expect ‘good times’.

Australians are concerned about Australia’s economy over the next twelve months with 30% (down 1%) of Australians expecting ‘good times’ economically over the next twelve months compared to 35% (up 2%) of Australians that expect Australia to have ‘bad times’.

Although an increasing majority of Australians 57% (up 1%) say now is a ‘good time to buy’ major household items, 22% (up 3%) say now is a ‘bad time to buy’.

This poll was taken before this week’s RBA meeting.

Comments

  1. That’s not my experience. Confidence seems to be still elevated, although there is no doubt that some more out of cycle rate increases will damage that, conversely a reduction by the RBA will boost confidence.

    People are certainly still buying homes.

      • Yes I appreciate that. I have solid contacts in the transport industry who tell me that haulage for big box retail has been high since December – so many conflicting signals.

        But as an indicator, people don’t buy homes when they are nervous about the future.

        I think that we will still be wondering on what direction the economy is heading in six months time.

    • People are certainly still buying homes.

      seriously PF what has that got to do with anything? people need places to live so of course they are still buying homes, they are also still buying food and clothes?

    • People may still be buying homes where you are Peter, but they’re not in Melbourne. From RPdata’s February market update.

      “Melbourne’s estimated sales volumes are currently -28% below the five year average.”

      Hang on, aren’t you in Brisbane?

      “• Estimated sales volumes in Brisbane were -40% below the five year average in November 2011. • Volumes have been consistently below five year average levels since mid 2009.
      • Sales activity remains below the recent lows of 2008.”

      • 2011 was 2011 – does time stand still in Victoria? I think not – what I’m saying is the confidence is above the 2011 levels. It may not stay that way, but at this point it is.

        But I have to go – I’m busy writing home loans for all those Victorians that you can’t see buying homes.

        • You’ve mentioned that before Peter – Victorians trawling interstate brokers. Why? Are these prime borrowers generally?

          • Jimbo – no they aren’t – I don’t have an explanation for you.

            It puzzles me as well.

          • Agreed – GB – that’s your last warning, I’ve already deleted some of comments this morning. You are not painting a very flattery professional image of yourself if you continue in this manner.

          • yeah i noticed you deleted 2. one was just a sarcastic one liner but the other was a valid question. not too sure how either of these are against the rules as defined on the site.

            the question regarding PF’s style of business was very valid. if people are going to “spruik” here i think its reasonable that other readers understand where they are coming from. Ive repeatedly been accused of spriuking and have declared my hand as to what i do. i think this should apply to all.

          • GB – I told you and others here what I can see “on the ground”, if you disagree you are free to do so.

            If I see demand rising or falling, I will tell you that, and of course all anecdotal evidence has limitations.

            If you would rather not know, then don’t read my posts.

          • Peter,
            Before I make the comment I’m about to make, I’d like to make my position clear.
            I have read with great interest many of your posts in the past – I respect your position, and your right to express your opinions on this, or any other blog. In fact, I consider it a healthy sign that a blog allows and encourages alternative viewpoints – groupthink of any persuasion is a dangerous thing.
            However I find myself somewhat perplexed by your approach, particularly of late.
            Some days back, you suggested that one of the commenters here was “living in a fact-free zone” – apparently because he was in agreement with the views expressed in an article on this site.
            At the time, I pointed out to you that this site was awash with “facts”, and that, so far as I could see, most of those who frequented these parts were perfectly capable of absorbing and interpreting same.
            Yet here I see you once again submitting a view contrary to the main thrust of an article on this site and, once again, you “substantiate” your argument with such phrases as:
            “anectodal evidence”
            “what I can see “on the ground”
            “I wish I could quantify it for you..”
            “I think it may have dropped back….”
            “who tell me that haulage for big box retail has been high since December…”

            Can you see where I’m going with this?

            On the one hand you accuse people of living in a fact-free zone, then to substantiate your counter-argument, you offer nothing but anecdotes, opinions, and hearsay.

            If facts are so important, then it would be very interesting to see some facts that support your position.

            Otherwise, it would seem that perhaps YOU are living in a fact-free zone.

            You assert that “No you misunderstand, but that’s quite normal here….”

            An unnecessary global put-down, I thought, but perhaps that misunderstanding might be alleviated with the availability of a few facts?

          • Thanks for your criticism Julius. I think that i went to some lengths to point out that what I had to say on this issue was anecdotal – which menas that I cannot yet substantiate it.

            I read many many anecdotal accounts from others here, what is different about mine that troubles you?

            You will shortly be able to prove me incorrect if I am wrong – be a little patient. I’m actually the one in a “no win’ situation. I’m quite sure that if I’m wrong you and others will be very happy to point that out, and if I’m correct you will fall very silent on the issue.

            As I said to another in this thread, if you don’t want my opinion or you don’t like what I have to say, then don’t read my posts.

            Thanks Stewart – a gentleman as always.

          • I have no problem with you providing anecdotal comments – they are generally the most interesting, and often the most informative.
            What I have a problem with is you accusing others of living in a fact-free zone when they do the same.
            Your assumptions about what will happen in the event that you turn out to be right or wrong are just that…..assumptions.

          • I personally think PF’s approach is fine.

            And he is right about the significant recent spike, from what i can tell – and I am bearish on property!

            Ebbs and flows, people – the trend is what matters, anyway…

    • Peter do you have a comparison of where we are at right now in regards to the number of houses being sold in the Brisbane area (eg are we at the same level as 2004) and are you finding that new lending criteria is going to be a big player in holding the housing market down?

      • Mat-toe – I only have anecdotal evidence, apart from the AFG data which you have access to.

        In 2004 lending policies were being relaxed – which isn’t the case now.

        Seriously I’m not seeing a huge surge, but there is more interest. I wish that I could quantify it for you, but I can’t.

        I think that it may have dropped back a little over the last week or two.

        • There certainly has been more interest lately.

          Even my BurbWatch stats show that absolute sales have increased markedly from the beginning of the year.

          There is a recent tapering (last few weeks), but no one, IMHO should be denying a bounce.

          My 2c

      • Mat-toe, Peter rubbishes the figures as being out of date (without providing more recent ones), but check out RPData’s February report at http://www.directhouseandland.com/uploads/1/0/8/7/10877180/market_update_february_2012.pdf

        Brisbane sales figures are clearly the lowest they have been since 2001 (as far back as the chart goes).

        Key quotes for Brisbane:

        • Estimated sales volumes in Brisbane were -40% below the five year average in November 2011.
        • Volumes have been consistently below five year average levels since mid 2009.
        • Sales activity remains below the recent lows of 2008.

  2. Peter, you say confidence is elevated while Parky says we’re moping around as if we live in Greece. One of you must be wrong?

    • Well I was referring to house sales as compared to recent times.

      I think that comparisons to Greece are extremely misguided, bordering on dishonesty.

      • +1 re comparisons with Greece being extremely misguided.

        Greece doesn’t control its currency and so can’t do what Japan has done to maintain GDP growth as the private sector deleveraged. Greece (and all Euro using nations without trade surpluses) are more like NSW but with the purse strings being held by WA and QLD.

        Using the EURO is presenting the same problems as the Gold Standard, Bretton Woods and the Argentine USD peg and borrowings. History certainly rhymes.

        • With regards to our currency, we do not control that either, not really. It is affected by what we do certainly, such as the mining ToT causing it to rise. However it also rose against the USD because of all the QE. Perhaps we could do what Japan did, however there remains the question of whether we (that is the lobby group dominated politicians) would do so. I suspect the current muddle through will continue, and that at the moment is not enough to improve confidence, particularly with the ongoing European debacle.

  3. rate cut cinfidence boost has evaported because rates started going back up. to show how oveleveraged households are a .1% rate increase is equivalant to.5% worth of cuts. all the good work from the nov / dec rate cuts has been undone. wasted by the RBA

    • No you misunderstand, but that’s quite normal here – the 0.10% in itself has no impact – it’s the possibility of more increases that worries buyers.

      No one likes signing a blank cheque, which is why fixed rates have increased in popularity above trend.

      It’s the unknown that reduces confidence, not the reality.

  4. I am in the worse off category:

    Wife made redundant whilst on maternity leave (number 6 of 11 from her mothers group to get made redundant, would love to see some research on this, seems well out of whack).

    Wages frozen

    Taxes increasing

    Rebates disappearing

    I for one am not a confident man about keeping my job, I work in IT for a bank in Sydney.

  5. @ GB re “The stock market tanks and then the economy tanks”.

    I know this is the conventional wisdom but my research on quarterly figures for GDP vs stock market doesn’t show it. Maybe it’s because I need monthly figures, but I tried lags and had no luck.

    Check the scattergrams towards the bottom of the post:
    http://thortsoninvesting.blogspot.com.au/2012/01/gdp-growth-vs-all-ords-growth.html

    My big takeaway from the analysis is that over long periods stockmarket grows like GDP except during long periods of inflation or high rates to bring inflation down and then the rates easing.

    The market gets hugely overbought and over sold in the short and medium terms.

    From 98 to now, stock market growth got way in front to 2007 and has come back to GDP growth near enough if you index them both to when long bond rates got back to 5% in 98 after the defeat of high inflation.

    Anybody able to provide a better or contrary analysis?

    • “The stock market tanks and then the economy tanks”. yeah very broad brush Ex but is typically what happens. the stock market often overshoots on the upside and the downside and those moves are usually (always) based on the forward leading indicators.
      sometimes those indicators give false signals sometimes they dont but the forward indicators started turning down here early last year. the stock market fell 20% as those indicators got worse, a huge fall for any asset class.
      there has been no improvement in the forward indicators which is why our market wont bounce unlike every other stock market.
      if the economy wasnt going to tank the stock market would have bounced by now. i.e the forward indicators were giving false signals of weakness.
      but they werent giving false signals they were correct and now the weakness is being played out in the real economy and is getting weaker (GDP 0.4%).
      the rot is setting in. the fact the stock market cant get up off the canvas tells you there is something very wrong in the economy and ill even tell you what it is….a bursting housing bubble.
      so i would advise anyone thinking along PF’s lines of leveraging up into the property market just as it shows serious sign of collapse on the same scale of the stock market crash in 2008, dont do it.
      PF comments on this blog are exactly the sort of thing stock brokers were telling their clinets in late 07 early 08 as the stock market bubble burst.

  6. I used to follow a blog until it turned very nasty with ‘grumpy old men’ berating anyone with differing views. That seems to be happening here now. Which is a pity as the articles here are of very high quality and the contributors must work incredibly hard to produce them.

    We can disagree with others, but why berate them, call them names (eg mining bot etc etc). Monitors might have to set higher standards and enforce them. However hopefully we could appreciate others views without denigrating them.
    My half cents worth.