Consumer confidence in Australia dropped 1.2% in March according to the Westpac – Melbourne Institute Consumer Sentiment Index.
That’s a bit disappointing given the RBA rate cut and overt easing bias. But Westpac highlights that this is still “9.2% above the December low and on a par with the levels seen prior to the Budget in May last year”.
So it’s not a disaster.
What sticks out in this report however is that “consumers remain very concerned about the outlook for the economy and job security” while at the same time reporting that they are more worried about their finances 12 months out. This sub-index fell 1.9%.
Equally, Westpac reports that:
Assessments of ‘time to buy a major household item’ were a notable weak spot this month with this sub-index falling 5.1% to be 9.3% below its long run average. While this is still well above its December low, March’s reading is the second weakest since 2009. It is very likely that at least part of this decline is a reaction to recent falls in the Australian dollar and the impact this is expected to have on the cost of imported goods.
But on the positive front, survey participants are less risk averse in their preference for savings – that’s low rates working on choice and asset allocation. But worrying the RBA will be the “corresponding rise in the proportion nominating ‘real estate’ from 20% in December to 25.5% in March”.
Equally positive is the fact respondents are less worried about losing their jobs than they were last month. But this is still well above the long-run average.
So, all in all with confidence around the long-run average, there is something for everyone in this survey.
Here’s Westpac’s summary:
There are also some encouraging details in the March Consumer Sentiment survey. However, confidence remains lacklustre overall, with sentiment neutral rather than optimistic and, we suspect, still quite fragile With concerns that sub-trend growth may persist for longer than had been assumed through most of last year, that points to continued downside risks to the outlook. In effect, neither the national accounts nor sentiment have delivered enough ‘good news’ to tilt the balance of risks back to even. As such, we continue to expect another rate cut of 0.25% in the April/May ‘window’.
The big question, however, is will lower rates do the trick?