- Australians became very gloomy last week following the release of Australia’s weak Q4 GDP report.
- The ANZ-Roy Morgan consumer confidence index tanked 4.8%, leaving it at the lowest level since late 2017.
- Views towards the economy and family finances were particularly hard hit.
- ANZ Bank says that if the decline is sustained there’s “no doubt the RBA will take note”.
Sentiment towards the Australian economy tumbled last week following the release of Australia’s weak Q4 GDP report.
ANZ Bank’s Australian Consumer Confidence Index, produced in conjunction with Roy Morgan Research, slumped by 4.6% to 109.5, leaving it at the lowest level since late 2017.
“Confidence took a significant hit last week, falling well below average,” said David Plank, Head of Australian Economics at ANZ Bank.
“We think the soft GDP report and, perhaps more importantly, the focus on a ‘per capita recession’, were the primary factors in the plunge.”
In the December quarter, Australia’s economy grew by just 0.2% following a weak 0.3% increase in the three months to September. With population growing by around 0.4% per quarter over the same period, it meant that output per person fell for two consecutive quarters, marking what is known as a “per capita recession”.
Whether due to the media’s focus on the “R” word or simply a realisation that Australia’s economy slowed sharply in the second half of last year, the GDP report had a large impact on the ANZ survey with all five components falling heavily, led unsurprisingly by a steep decline in sentiment towards Australia’s economic outlook.
Views on current economic conditions tanked by 7.9% while sentiment towards the economy looking five years ahead fell by a smaller, but equally ugly, 5.4%.
Those trends were evident in sentiment towards family finances with views on current conditions and those in the year ahead sliding 2.9% and 5.4$ respectively.
With confidence towards the economy and personal finances souring, views on whether now was a good ‘time to buy a household item’ also weakened, dipping 1.7% following a 2.1% decline a week earlier.
According to ANZ, the result won’t go unnoticed by policymakers at the RBA.
“The last such big decline in confidence was the weekend of the Wentworth by-election, something we thought was unlikely to have a lasting impact on sentiment,” Plank said.
“This decline could be longer-lasting as it appears to be more related to underlying economic conditions.
“If it proves to be a sustained decline then it is yet more bad news about a household sector that is already under pressure.
“No doubt the RBA will take note.”
On Wednesday, Westpac Bank will release its Australian consumer sentiment survey for March. A similar result to the ANZ index will do little to dent widespread expectations that the RBA, and politicians, will have to act to support household spending, the largest part of the Australian economy.
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