An unsettling correlation between WA and Oz

A little more today from Westpac’s superb Red Book of consumer attitudes. This time a profile of WA consumers:

― The last time we profiled Western Australia in our state snapshot, back in Feb, sentiment in the state had taken a sharp turn for the worse with index readings a solid 5-10pts below the national level. Six months on and the situation is largely unchanged.

― WA consumers are, somewhat surprisingly, less concerned about their finances with these sub-indexes sub-100 but in line with the rest of Aus. They are still deeply pessimistic about the economic outlook though. The near-term view is particularly weak with WA’s ‘economic outlook, next 12mths’ sub-index stuck at around 70 vs 84 across the rest of Aus .

― WA consumers are much more concerned about jobs. WA’s unemployment rate has continued to trend steadily higher at about 1ppt a year, having risen from a low of 3.7% in mid-2012 to 4.7% in mid-2013, 5% in mid-2014, hitting 6% in Aug, drawing back in line with the national rate.

― Sentiment-wise the most significant developments since Feb have been around responses to ‘time to buy’ questions which have weakened sharply. The mining downturn is now clearly feeding into decisions about ‘big ticket’ purchases. It has also seen an abrupt turnaround in housing markets with buyer sentiment going from above the rest of Aus to broadly in line.

There are two ways to read this. Westpac sees it as a strong performance that WA households have not sunk far below other states. The other way to read it is that other state’s sentiment is sinking in part owing to WA.

If the latter proves to be true then the coming WA meltdown, the leading edge of which is now apparent in housing sentiment, is going to hit the rest of the country hard.