Despite the RBA keeping rates on hold last week, the ANZ-Roy Morgan consumer confidence index fell by 3.4 points and has now spent a record 23 weeks below 80 points – “the longest weak streak on record”:
The decline in confidence was driven by ‘Current financial conditions’, which plunged 6.9pts, while ‘future financial conditions’ dropped 9.6pts.
‘Time to buy a major household item’ also fell 2pts.
ANZ Senior Economist, Adelaide Timbrell, noted that “confidence has been in very weak territory (below 80) for 23 consecutive weeks, the longest weak streak on record”.
“Homeowners with debt still have far lower confidence than other cohorts, as restrictive interest rates squeeze cashflows of indebted households”:
“Average confidence fell among all the housing cohorts, but the biggest fall was among renters (-9.4pts) after a jump in the previous week”.
Westpac has likewise recorded a lukewarm response to the rate hold:
- Westpac-Melbourne Institute Consumer Sentiment dips 0.4% to 81.
- Index remains in deeply pessimistic territory.
- RBA’s rate hike pause again does little to boost confidence.
- Inflation still dominating, including recent fuel and energy price rises.
- Housing sentiment mixed: deeply negative on purchase, bullish on prices.
- Confidence in labour market improves a touch.
In recent meetings, sentiment continues to show only a muted response to the RBA Board’s decision to leave the cash rate on hold. The Board opted to leave rates unchanged for a second month in a row at its August meeting, the first consecutive ‘on hold’ decisions since the tightening cycle began in May last year. Consumer sentiment has only lifted 2.3% in response, with continued pressures on family finances and concerns about the interest rate and economic outlook still weighing heavily on confidence.
The August survey detail pointed to little or no impact from the RBA’s decision to pause. Responses showed no improvement over the course of survey week, sentiment instead declining 4.9% between those surveyed prior to the RBA decision and those surveyed after. The sub-group detail also continued to show a disappointing reaction from the mortgage belt – sentiment amongst consumers with a mortgage down 7.2% in the August month and, 0.8% below its June level despite the two-month pause.
The lacklustre response may be partly due to the RBA’s continued warnings that further tightening may still be required. Most consumers are still bracing for further rate rises with over two thirds of those surveyed after the RBA decision expecting rates to move higher over the year ahead, nearly half of this group expecting a rise of over 1ppt. That is an improvement on the July survey, which found nearly three quarters of consumers expecting rates to rise, but in line with the mix of responses seen when the RBA first actively paused its rate rise cycle back in April.
