The first gauge of the impact of budget leaks and the commission of audit on consumer confidence shows Australians are spooked by the prospect of increased taxes.
The ANZ-Roy Morgan Consumer Confidence index is down 8% in two weeks to May 4.
The large move for the index is most likely to have been driven by policy leaks in the lead up to the May 13 Federal budget, with the Commission of Audit’s report and the mooted ‘deficit reduction levy’ covered extensively in the media in the past week.
ANZ Chief Economist (Australia) Ivan Colhoun says the policies of most concern to the consumer spending outlook are the mooted temporary deficit reduction levy and the proposed changes to the eligibility for welfare and pension payments.
“These policies, if introduced, would impact consumption both directly and indirectly,” he says.
“This index will be important to watch for the likely magnitude of the policy’s indirect hit to consumer spending – and how sustained the impact from any other Budget-related news will be on consumer confidence more generally.”
The weakness in the index was driven by another sharp fall in consumers’ perceptions of ‘economic conditions next year’ (-10.8%) and this subindex is now down over 20% over the past fortnight.
However, there was a silver lining in the report. The subindex of confidence, perceptions of ‘financial situation compared to a year ago’, which is most correlated with households’ spending decisions, rose modestly last week (+1.9%) after falling a more modest 3.7% in the previous week.
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