Australian consumer confidence has fallen for a second consecutive week.
Confidence dipped by 0.5% to 110.0, taking the two week decline to 3.9% according to the latest ANZ-Roy Morgan survey, which now sits fractionally below its long-run average of 112.7.
Three weeks ago the survey logged its largest one-week gain on record following news that Malcolm Turnbull had replaced Tony Abbott as Australian prime minister. Combined, the two-week decline has now unwound around half of that impressive gain.
Looking at the internals of the report, results were mixed with sentiment towards the long-term economic outlook tumbling while at the same time sentiment on whether now was a good time to buy a major household item surged, having hit the lowest level since May 2009 last week.
The movements of the surveys various subcomponents are found below:
Financial situation compared to a year ago: 103.8 (-3.6%)
Financial situation next year: 121.9 (-0.9%)
Economic conditions next year: 95.7 (+0.6%)
Economic conditions next five years: 102.3 (-5.6%)
Time to buy a major household item: 126.4 (+6.5%)
Felicity Emmett, Australian co-head of economics at the ANZ, believes that Australia’s new prime minister has a battle on his hands to help restore household confidence.
“The new government is taking charge at a time when global financial market volatility and early signs of a softening housing market is adding to the existing woes of the household sector, including weak income growth and high household debt.
As such, it will be difficult for the new government to engineer a sustained cyclical uplift in confidence. The problems facing the economy are structural and include a well-known reliance on mining and a high cost base. The new government can support a structural realignment of the economy through productivity-enhancing reform. In the absence of outright stimulus, however, it can do little to support activity in the short-term.
Hence, confidence is likely to remain under pressure over the coming months, with an easing housing market likely to increasingly dominate news flow and sentiment.”
Although ANZ is not alone in its view that residential housing conditions are likely to soften in the period ahead, ongoing strengthening in the labour market – particularly across services industries – may be able to partially offset weakening house price growth. In September the ANZ job ads survey increased by an impressive 3.9%, leaving total growth in advertisements from a year earlier at 12.8%.
Given the outlook for employment, particularly job security, plays a crucial role in helping to shape investor confidence, any further strengthening in labour market conditions in the months ahead may be able to buttress sentiment levels and, as a consequence, household spending levels.