Yesterday’s poor ANZ-Roy Morgan consumer confidence survey, which recorded its lowest post-GFC reading, is driving fears that Australians could soon close their wallets and pull back on spending:
Nervous shoppers are threatening to close their wallets following the Coalition’s hard-hitting budget, with consumer confidence falling at the fastest rate since before the global financial crisis, a major bank survey shows.
…consumers remain to be convinced the Coalition’s formula of winding back welfare, cutting public servants and imposing new taxes such as the GP charge is the right answer…
[ANZ’s] head of Australian economics Justin Fabo said the findings suggested the fact that people were worried might be enough to slow things down…
That view was backed by Bank of America Merrill Lynch chief economist Saul Eslake who said it was the perception of the budget that may be more damaging than the severity of any actions themselves.
The Kouk has highlighted similar concerns:
History shows that low levels of sentiment lead to cautious consumer behaviour which shows up in higher savings, deleveraging and slower growth in spending.
Certainly, there are reasons to be alarmed, with consumer confidence historically providing a strong leading indicator of retail sales:
And house price growth:
Of course, the extent by which retail sales and house prices are affected will depend on whether the hit to consumer confidence is a temporary response to the Budget, or something more sustained. In the words of Saul Eslake:
”It’s not a good sign, but whether it’s a material sign is another question that you’d need a few more data points before you draw a conclusion.”
In any event, the monthly Westpac-Melbourne Institute consumer sentiment index will be released later this morning, which should provide more pointers on the mood of the Australian consumer.
