Economic confidence is suddenly hot in politics after it was reported the RBA governor and the head of Treasury told the Cabinet last week that it was a major missing ingredient in the growth equation.
Last week we had an interest rate cut which would normally make people, especially those with mortgages, a bit more upbeat. But these are not normal times.
The weekly read on consumer sentiment is out in the ANZ-Roy Morgan survey and the data is flat, falling 0.6%.
ANZ says the “modest change likely reflects the positive impact from interest rate cuts, somewhat offset by concerns about the economy and government leadership speculation.”
The concerns in some quarters that a rate cut would actually make people a bit more worried about the state of the economy seem to have been borne out. ANZ says:
Confidence in the economic outlook over the next year (-3.6%) and next five years (-2.6%) both declined. The fall was likely driven by the weakening growth outlook which prompted the RBA to cut rates and government instability which may have reduced confidence in the medium-term economic outlook.
The impact of the rate cut and the fall in petrol prices did appear to register somewhere, however, with “household finances compared to a year ago” was up 1.6%.
ANZ chief economist Warren Hogan said: “It appears that lower rates and higher house prices have contributed to households’ assessment of their own household finances as relatively healthy. But at the same time, households are clearly concerned about the economic outlook and job security. While expectations about the future remain subdued, the risk is that households will choose to save a sizable part of the cash flow boost from lower rate cuts and petrol prices.”
Here’s the chart: