Consumer confidence climbed off the canvas last week, but the same headwinds remain

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Australian consumer sentiment climbed back off the mat after three straight weeks of heavy falls.

The weekly ANZ-Roy Morgan consumer confidence index rose by 3.9% to 113.5, slightly above the long-term average and up from last week’s low of 109.2.

However, it will take more than one week of good news to reverse the worrying trend in how Aussie consumers are feeling.

“While last week’s improvement in confidence is encouraging, volatility in weekly responses makes it difficult to ascertain the underlying momentum,” said David Plank, ANZ’s head of Australian Economics.

Data for the survey is collected on the most recent weekend, and is based on around 1,000 face-to–face interviews.

Last week’s rise was driven by increases in each of the four major sub-indexes. Household views towards their current finances bounced by 4.7%, which offset the previous weeks’ falls.

Views toward future financial conditions also reversed last week’s 5.3% fall, with a gain of 6.4%.

Australians remain less optimistic about their future finances though, as the sub-index remains below its long-term average.

There was also a rise in consumer sentiment towards the current and future state of the broader Australian economy, but again both indexes are languishing beneath their long-term average.

Although sentiment bounced back last week, Plank also said that falls in the week prior were likely exacerbated by the dual-citizenship crisis in Australian parliament.

The High Court hearing in the citizenship controversy has now been delayed until October. But last week’s result reinforces the importance of good governance, and Aussie consumers won’t be buoyed by uncertainty about the incumbent party’s ability to govern.

According to Plank, despite week-to-week changes, the broader theme hampering consumer confidence remains in place: low wage growth.

“Broadly, confidence has slipped in August, weighed down by concerns around disappointing wage growth and higher energy costs,” Plank said.

It’s an issue which Business Insider’s David Scutt took an in-depth look at last week.

Although the Australian economy is showing positive signs of growth, until the benefits start flowing through to households then consumer confidence is likely to remain subdued.

And if Aussie consumers aren’t buying the growth story, it raises concerns about headwinds to consumption growth – the key driver of domestic GDP.

Unfortunately, as long as wage growth is stuck in neutral, ANZ’s Plank doesn’t expect a meaningful pick-up in consumer sentiment.

“In our view, despite a strong labour market and moderate economic activity, any improvement in confidence is likely to remain capped until households experience a material acceleration in wage growth, which seems unlikely anytime soon.”

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