If Australian households were feeling uneasy ahead of tonight’s federal budget, it’s not been seen in the latest ANZ-Roy Morgan consumer confidence report.
The survey’s headline index rose by 2.0% last week to 113.9, recouping some of the prior week’s losses. Confidence now sits marginally above its long-run average.
According to ANZ, the improvement was broad-based in nature with four of the survey’s five components moving higher during the week.
Sentiment towards the economy looking one and five years ahead increased by 4.3% and 2.9% respectively, mirroring a 2.9% gain in perceptions towards consumers’ current financial situation.
There was also good news when it comes to retail spending, particularly given weakness in recent official data released by the ABS, with the subindex on whether now was a good time to buy a major household item rising 1.5%.
The only weakness in the survey came from perceptions towards personal finances in the year ahead which slipped 0.9%.
Felicity Emmett, head of Australian economics at ANZ, put the improvement down to confidence that households won’t be hit hard by the federal budget — at least according to leaks received so far — along with the potential for a rate cut from the RBA this afternoon.
“Confidence has been volatile in the lead-up to the Commonwealth Budget, but the solid gain last week is a good sign,” said Emmett.
“With leaks around the Budget suggesting no major hits to households, we expect that last week’s rally represents an element of relief. It’s possible also, that the recent speculation around the potential for RBA rate cuts may have supported consumer sentiment over the past week.”
Looking ahead, Emmett suggests the budget will play a crucial role in determining sentiment levels moving forward.
“Tonight’s Budget will be important in shaping confidence over the next few weeks in the lead-up to a double dissolution election in early July. Given the weak tone to retail sales over the past few months, some boost to confidence would be welcome, especially if it translated into stronger consumer spending,” she said.
On current evidence it suggests that consumers aren’t all that worried heading into event, perhaps raising the bar for treasurer Scott Morrison to get his budget delivery right given softened expectations.
We’ll find out that answer soon enough as he steps up to the speaker’s box at 7.30pm AEST this evening.