Consumer confidence falls again

By Leith van Onselen

The ANZ-Roy Morgan Research (RMR) consumer confidence index was down for a third consecutive week, falling 0.7 points to 111.7 in the week ended 8 February, to be tracking just below the long-run average (see next chart).

ScreenHunter_5948 Feb. 10 10.22

According to ANZ chief economist, Warren Hogan:

Confidence in the economic outlook over the next year (-3.6%) and next five years (-2.6%) both declined. The fall was likely driven by the weakening growth outlook which prompted the RBA to cut rates and government instability which may have reduced confidence in the medium-term economic outlook.

The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index. Note the historically large divergence persists between the two measures, with Westpac reporting that pessimists continue to easily outweigh optimists:

ScreenHunter_5949 Feb. 10 10.26

It’s worth also noting that consumer confidence is down 1%/10% from the same time last year according to ANZ-RM and Westpac.

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Comments

  1. The 0.25% cut in interest rate cuts another 10% from interest earnt from capital on deposit in our household and we’ve cut spending even further to preempt the future cuts to interest rates.

    We’re in pretty good shape but I can see that the bulk of
    baby boomers will be on the aged pension much faster than they thought.

    • You’re all hurting my head. What do you mean by “capital on deposit in your house”?

      Age pension age of 65-70 seems to be a REMARKABLY longer period of time than a lot of baby boomers had any plan to support themselves.

  2. Recently had an argument here with someone who felt very sure that the Government Guarantee for deposits would be honoured, and no bail-in would occur.

    Please go to APRA December 2014 Banking Statistics here:
    http://www.apra.gov.au/adi/Publications/Documents/0115-MBS-December-2014.pdf
    for current bank deposits of $1,796,934,000,000 (page 13)…. let’s say $1.8Trillion.
    ………
    If the banks become insolvent as they did in early October 2008 (Prof. Ross Garnaut & David Llewellyn-Smith; Kevin Rudd), then the RBA would have to create $1.8Trillion to loan to the federal government to cover the guarantee for Australian savings.
    When you add this to federal government debt of $300Billion, you have a debt of $2.1Trillion, which is about 135% of 2014 GDP ($1.56Trillion).
    If interest on this debt is about 4%, then the yearly interest bill would be $84Billion ($84,000,000,000) or about $1.6Billion per week, and
    $231Million per day (about the cost of a new hospital).
    Tax (federal)revenue for 2013 was $338Billion, so for 2014 let’s say $350Billion.
    The interest bill on federal government revenue would be $84Bn/$350Bn = 24% of receipts.

    I think they might go for the bail-in.

    • argue the act if you must argue at all.

      It aint straight forward that depositors are guaranteed

      http://www.comlaw.gov.au/Details/C2011C00034/Html/Text#param5

      “16AG Limit on payments to account‑holder with declared ADI
      (1) Despite section 16AF, an account‑holder is not entitled under that section to be paid, in connection with the protected account or protected accounts the account‑holder has with a particular declared ADI at a particular time, one or more amounts totalling more than the limit prescribed by, or worked out under, the regulations.”

      • jelmech

        Thanks for that information…more ammunition…

        But I think most, if not all, of the $1.8Trillion in deposits would be arranged such that they are all under the $250,000
        guarantee.
        So the federal government is guaranteeing $1.8Trillion in deposits.

      • If I read it right, it appears there is an amount set aside for an ADI if APRA decides to wind it up…

        16AD Declaration that Subdivision C applies in relation to ADI
        Declaration to specify amount for meeting entitlements
        (2) The declaration must also specify the amount (if any) that is to be credited to the Financial Claims Scheme Special Account in connection with the application of Subdivision C in relation to the declared ADI. If APRA’s application under section 14F was made on or after 12 October 2011, the amount must not be more than $20,000,000,000.

      • Yes, that $20,000,000,000 would limit it to 90 ADIs…. If we have that many..
        OR
        You would be more likely to be caught by the $20,000,000,000 if you stuck with the big 4.

      • Exactly jelmech.

        So if someone decides to “hit the bid” on their paid off property, then they’ll have to split their settlement across multiple ADI’s and then watch those ADIs carefully – assuming they know what to look for.

  3. I know I’m the odd one out here, but I don’t see the problem with mortgages. Whenever we’ve paid ours off, someone in the household has just increased spending on other stuff that’s less necessary than a better house. Lots of economies in a better house, too. Easier to cook, less travel costs, you can manage with crappier cars.