The ANZ-Roy Morgan consumer confidence index registered a big fall in the week ended 28 February, falling 3.0 points 111.3, to be tracking just below the long-run average of 112.7 (see next chart).
The overall fall in confidence was driven by a marked deterioration in perceptions towards the economy, with the sub-index measuring expectations for the year ahead slumping by 6.3% and an even larger 7.2% decline looking five years ahead.
According to Warren Hogan, chief economist at ANZ, the debate over tax reform and negative gearing is making consumers anxious:
Confidence has dipped as concerns around the economic outlook come back into play. The heightening debate on tax policy, with its focus on negative gearing and house prices, looks to be creating some uncertainty around the outlook for households. The Government’s ability to deliver a clear and credible economic platform is clearly important for consumers, and the delivery of a coherent tax policy will be an important part of that platform.
Encouragingly, consumers remain optimistic about their current finances, with the re-energised property market a likely factor here. Auction clearance rates have begun the year on a better note even as sales volumes have returned towards more normal levels. The important question is whether this resurgence in housing translates into stronger household spending in an environment of low wages and inflation. This is critical to meet the RBA’s expectation of consumption growth returning to above trend growth.
The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index, with both fairly lacklustre:
Hate to see what will happen once house prices and construction begin to fall.
