Australian consumer confidence tumbled to the lowest level since October 2015 last week, according to the latest ANZ-Roy Morgan survey.
Coming on the back of a very weak retail sales report for February, revealing that sales fell by 0.1% , it casts a worrying picture on not only how households feel at present, but also the outlook for consumption, the largest part of the Australian economy.
Perhaps more concerning than the drop in the headline confidence index was the decline in the survey’s subindices, not only last week, but since the beginning of the year.
Perceptions towards both the economic outlook and household finances have been steadily falling, as seen in the charts below from ANZ.
Here’s where confidence towards the economic outlook in the year ahead currently fares.
And how Australians see the economic outlook looking five years ahead.
They’re both lower than usual, and continuing to deteriorate.
And, despite stocks prices sitting at multi-year highs and house prices in Australia’s eastern states logging some enormous increases over the past year, perceptions towards finances are now also weakening, and fast.
Here’s how Australians view their current finances compared to a year earlier.
And how they see them looking one year ahead.
Both have fallen sharply from the levels earlier this year.
Yes, they’re still around historic averages — so it’s not dire at present — but it’s unusual that they are deteriorating as our paper wealth continues to hit record highs.
Soft labour market conditions could be one factor that explains the weakness, placing downward pressure on wages, although, for anyone who’s owned a house in Sydney or Melbourne over the the past year, it’s likely that many have seen their house earn more than them over the same period.
So why many are seeing their wages grow slower than usual, their paper wealth, assisted by asset price gains, should be making many Australians feel wealthier.
It is a strange outcome, perhaps prompted by now-widespread concerns that Australian house price growth is unsustainable and at risk of going into reverse.
Whatever is driving the increased concern towards the economy and finances, as David Plank, head of Australian economics at ANZ points out, should the current trend continue, it suggests household spending may also follow suit.
“If confidence continues to waver then it seems reasonable to expect additional impacts on consumer spending,” he said following the release of today’s report.
That’s something that will be of concern to policymakers at the RBA and in Canberra should it eventuate, particularly at a time when Australia’s residential construction boom is coming to an end.