Household budgets remain in focus as Australian consumers stay cautious

(Lucas Oleniuk / Toronto Star via Getty Images)
  • The Westpac—Melbourne Institute consumer confidence index edged slightly higher in June.
  • Views towards household finances remain below their long-run average, while views toward the broader economy are more upbeat..
  • The results also provided some evidence that the Sydney housing market is re-calibrating amid ongoing price declines.

Australian consumers remain cautiously optimistic, with positive signs in the broader economy offset by continued pressure on household budgets.

That’s the takeaway from the latest Westpac Melbourne Institute consumer sentiment index, which rose by 0.3% in June to a reading of 102.1, in seasonally adjusted terms.

So the number of optimists still outweigh pessimists, as designated by a reading over 100.

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

“While there has been a clear lift in confidence around the economy, this has had a muted impact on views around family finances, which remain downbeat.”

Here’s how the key sub-indexes performed in the latest reading:

The latest survey also gave some insight into how consumers’ view of the housing market — currently a hot topic amid the ongoing downturn in Sydney and Melbourne.

House price expectations fell by 7.3% to a reading of 119.9 — the lowest level in more than two years.

Conversely, the ‘time to buy a dwelling index’ rose by 4.5% to 105.7, which marked the highest reading since September 2016.

“Buyer sentiment showed a particularly strong 7% gain in NSW suggesting the price correction may be starting to ease affordability pressures in some areas,” Hassan said.

The ‘finances vs a year ago’ sub-index managed to recover most of last month’s sharp 6.5% fall. Views towards future finances also picked up, but both readings remain below their long-run averages.

Source: Westpac / Melbourne Institute

“We suspect this month’s gains are coming from a clearer assessment of Budget measures announced last month,” Hassan said.

However, despite a solid reading for GDP in the March quarter last week, views towards current and future economic conditions declined — although they both remain comfortably above the long-term average.

While the economy grew by a solid 3.1% to start the year, analysts have suggested those gains could be “one-off” in nature.

And the broader economic challenges specifically affecting household budgets — most notably, extra slack in the labour market and low wage growth — still remain.

“While the improved tone to sentiment compared to last year is welcome, the mix is still not pointing to a sustained lift in consumer demand with views on family finances still downbeat and a clear ‘risk averse’ tone to other survey responses,” Hassan said.

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