The ANZ-Roy Morgan Research consumer confidence index retraced in the week ended 18 October, falling 2.3 points to 113.3 to be tracking around the long-run average (see next chart).
The fall in confidence was driven by Westpac’s surprise decision to raise its variable mortgage rate for its home loan customers, along with pessimism about the outlook for house prices. This drove a further 3.1% fall in the question on whether now is a “good time to buy a major household item”, leaving the sub-index nearly 8% below its long run average.
According to Felicity Emmett, co-head of Australian economics at ANZ, the housing market is likely to drive consumer sentiment and the economy over the foreseeable future:
“The fall in consumer confidence last week was likely driven by deteriorating sentiment about the outlook for the housing market. Higher mortgage rates and falling auction clearance rates are pointing to weaker growth in house prices. The latest ANZ-Property Council Survey revealed a decline in property sector confidence with falls expected in residential prices and construction. A softer housing market is likely to weigh on consumer confidence, economic growth and employment.
Housing has been a key pillar of growth this year, and without that support in 2016, we expect the economy will need further stimulus in the form of another 50bps of rate cuts from the RBA. While the focus is turning to the November RBA board meeting, we continue to expect the Bank to wait until February to change policy settings.”
The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:
Both are fairly lacklustre.
