The government's income tax cuts fail to inspire Australian consumers

(Photo by Doug Pensinger/Getty Images)
  • ANZ’s measure of consumer confidence slipped last week, despite the passage of the Turnbull government’s $144 billion tax-cut plan .
  • Despite the falls, ANZ says the broader trend for consumer confidence remains positive.

There were some positive cues for Australian households last week, as the federal government’s $144 billion tax-cut plan passed through parliament and the ASX rose to decade-highs.

But according to ANZ’s weekly measure of consumer confidence, that failed to translate into a meaningful lift in consumer sentiment.

The ANZ-Roy Morgan consumer confidence fell by 0.6% to a reading of 121.4.

“It’s a little disappointing that the passage of the income tax cuts through Parliament last week failed to boost expectations about future finances, although this likely reflects the softer housing market and ongoing global tensions,” said David Plank, ANZ’s Head of Australian Economics.

The main reason for the lower reading was a sharp fall in the outlook for household finances. Views towards financial conditions over the next five years slumped by 6.5%, offsetting three straight weeks of gains.

Views towards current financial conditions rose by 2.8%, accompanied by a lift in sentiment towards current economic conditions which rose by 5% to hit a four-month high.

Source: ANZ

Although the positive catalysts failed to provide a spark for Australian households, Plank said broader trends remain promising after confidence declined last year.

“Stepping back from weekly volatility, consumer confidence has been on an upward trajectory for some months,” Plank said.

“This is encouraging in the face of falling house prices, and provides some comfort given that we see household spending as the key domestic risk to the economic outlook.”

Plank said the index had consolidated over the last two weeks after climbing strongly at the start of June. The four-week average for the composite index is now at a four-month high.

That stands somewhat in contrast to Westpac’s monthly reading of consumer confidence, which showed views towards household finances remain below their long-run average.

Westpac senior economist Matthew Hassan said the reading “remains well below the levels typically associated with a robust consumer”.

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