Australian consumer confidence imporved 0.9% last week, according to the ANZ-Roy Morgan weekly confidence index.
But the ANZ says that’s not especially good news because:
The index is below the level of six months ago and 2.0% below the level of a year ago. Despite the fall in interest rates and petrol prices in recent times, confidence remains soft. The rise this week leaves the index still below long run average levels.
Crucial to the economic outlook is that while people are feeling better than they did a year ago, they are still worried about their future.
The ANZ reported that:
The sub-index ‘financial situation compared to a year ago’ rose 3.6%, possibly in delayed response to the interest rate cut. However, the sub-index ‘financial situation next year’ fell 3.8%, suggesting that households remain unconvinced that the improvement will last.
That will stop the flow through of the positive impacts of RBA cuts which even the RBA believes have less impact than they used to because of confidence.
ANZ chief economist Warren Hogan said the wealth effect has also lost traction. “Rising house prices and new cyclical highs for the equity market do not appear to be having much of an impact on confidence at the moment,” he said.
This is not good news for an economy lagging confidence at both a consumer and business level.