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ANZ: 'Noise and flip-flopping' on tax reform could hurt Australian consumer confidence

Photo: Getty Images

The latest Newspoll shows the Coalition government of Malcolm Turnbull is back on level playing terms with the ALP with a 50-50 result on the two-party preferred basis.

But it’s not just on the political sphere where the government is losing traction, according to the ANZ’s market and economic research team. Writing in this week’s Australia Market Focus, the ANZ researchers say vitally important consumer confidence is at risk as well.

That means the positive benefits of stock and other financial market stabilisation could be lost on Australian consumers, the ANZ said.

Our emphasis below:

Financial markets were relatively stable last week. This bodes well for consumer confidence, but the noise and flip-flopping in the tax debate could act as a counterweight.

The researchers highlight that last week’s ANZ-Roy Morgan weekly consumer confidence report jumped “2%, a solid gain, with all sub-indices improving. We will be looking to see if the relative calm in financial markets will lift confidence further, which is now around its long-run average.”

But to draw out their point about the impact of the policy debate they add:

An area of concern is current developments in the public policy debate, where we have seen new and much narrower battle lines drawn on tax reform by the Turnbull Government. This does not bode well for consumer and business sentiment in our view.

The ANZ, uniquely among forecasters because of their weekly consumer confidence report, know the impact that a reversal in confidence – like the one we saw with the 2104 budget – can have on consumers.

The big question whether economic activity will follow any potential fall in confidence.

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