The data series which imploded after the 2014 Abbott-Hockey budget was dead flat for the week, with ANZ suggesting that the RBA rate cut – which typically leads to a lift in consumers’ outlook – may have balanced out any damage from the budget.
So on balance, this is a good result for the Coalition, as Malcolm Turnbull has pitched himself as a leader who can deliver elevated levels of economic confidence.
The ANZ-Roy consumer confidence index held steady at 113.9, leaving overall confidence levels marginally above its long-run average of 112.7.
Positivity generated by the RBA’s decision to cut official interest rates “looks to have been somewhat offset by consumers reaction to the Commonwealth Budget”, ANZ said.
Four of the five survey components held steady or fell during the week with the subindex on whether now was a good time to buy a major household item the once exception, bouncing 2.2%.
Although a positive sign for household consumption, the figure tends to bounce around significantly from week to week.
Aside from that improvement, the news elsewhere was underwhelming.
On the economic outlook, sentiment towards the year ahead fell by 1.2% while that looking five years ahead held steady.
That mirrored the view on personal finances with current perceptions and those for the year ahead slipping 0.8% and 0.6% respectively.
Based on the survey results, Felicity Emmett, head of Australian economics at the ANZ, suggests confidence would have likely fallen had it not been for the RBA’s rate cut.
“Consumer confidence was unchanged last week following a mixed bag of ‘good’ and ‘bad’ news flow during the week,” said Emmett following the release of today’s report. “Typically a cut in the RBA’s cash rate tends to lift confidence, and on its own we expect that was a positive factor for confidence given the lift in consumers views towards buying a household item.”
The chart below, supplied by ANZ, adds weight to this view. It tracks changes to confidence levels in the immediate aftermath of a rate cut, with the index almost always bouncing following an easing from the RBA.
Based on that historic pattern, along with the bounce in the index measuring household spending, Emmett suggests that the federal budget likely weighed on sentiment levels.
“It seems that consumer reaction to the Commonwealth Budget is likely to have weighed on confidence,” notes Emmett.
“The Fairfax/Ipsos post-Budget poll showed that 46% of households disapproved of the Budget while only 39% approved. While this is a better reaction than the one to the 2014 Budget, the lack of traction from the Budget would be disappointing given the Government is now in election mode.
“With the Coalition and Labor running head-to-head in the polls, the Government has its work cut out for it to win over the electorate by the 2 July election.”
Beyond the federal election campaign, Emmett suggests that sentiment levels are likely to “remain sensitive towards developments in the domestic data and policy front in the near term.”
Given tepid Australian labour market data of late, both from the official ABS survey and those from the private sector such as the ANZ job ads report released on Monday, it’s likely that next week’s jobs report from the ABS will be especially relevant to sentiment levels moving forward, particularly given the relationship between job security and household spending.
Markets will receive further news on that front on Wednesday when Westpac releases its monthly consumer sentiment report, including its closely watched unemployment expectations index.