When Australia’s Q2 GDP report is released tomorrow, it’s likely to reveal that the economy grew by around 0.4%, marking 100 consecutive quarters without the country experiencing a technical recession.
It’s an unbelievable achievement given all of the headwinds that have buffeted the economy since mid-1991, second only to the Netherlands in terms of an uninterrupted period of economic growth for a developed nation.
However, despite that track record, Australians, in general, remain pessimistic about where the economy is heading.
This view is no better demonstrated that in the latest ANZ-Roy Morgan consumer confidence survey, released today.
The headline index slumped by 3.5% last week — the second steep decline in a row — to 114.3, a stark turnaround to the view expressed just two weeks earlier when it surged to the highest level in nearly three years.
While the index still remains above its long-run average of 112.8, the move of the past two weeks has been sudden and sharp, as seen in the chart below from ANZ. From a 33-month high to a 14-month low in the space of just two weeks.
As was the case in the previous week, the chief catalyst behind the weakness was a sharp deterioration in sentiment about the outlook for the economy, particularly in the year ahead.
According to ANZ, views of the 12-month economic outlook fell by 7.6%, while views of the five year economic outlook dipped 2.7%. While both indices remain just below their long-run averages, the deterioration, seemingly, has come from nowhere.
Given the relative dearth of major economic data released last week, one can’t help but think the events in federal parliament last Thursday may have played a role.
Three senior ministers left parliament before debate ended on Thursday afternoon, seeing the government lose three votes in row in the lower house for first time in 54 years. It was about the farthest thing from a functional government as one could get.
Given the timing of the survey, it would have been fresh in the minds of those who participated.
Outside of views on the economy, and perhaps related to the events mentioned above, views on family finances also weakened, notes ANZ.
“Consumers’ views of their current finances fell 2.7%, while views of future finances ticked down 1.2%,” said the bank.
The final component of the survey — whether now was a good time to buy a major household item — also fell, sliding 3.9% compared to a week earlier.
According to Jo Masters, senior economist at ANZ, the result was disappointing, erasing recent gains and bringing confidence back to its lowest level in three months.
“While confidence remains well above its long run average, the uptrend looks to be losing momentum,” says Masters.
Looking ahead, she believes that “this week’s GDP report and RBA meeting will likely shape the news flow in the coming days and have the potential to influence consumers’ confidence over the coming week.”
True, and, of course, events in Canberra.