- Westpac’s consumer survey shows last week’s tax cut announcement failed to give sentiment a meaningful boost.
- Chief economist Bill Evans called the latest results “disappointing”.
Sentiment among Australian households remains subdued, despite the announcement of income tax cuts in last week’s federal budget.
The latest Westpac-MI consumer sentiment index fell by 0.6% to a reading of 101.8 in May, following a small decline in April.
A reading over 100 means the number of optimists outweigh pessimists. However, the same familiar themes — cooling house prices and subdued wage growth — continue to act as a drag on household finances.
Westpac chief economist Bill Evans also highlighted recent headwinds from higher oil prices, which has seen the cost of petrol climb by 8% over the last two months.
The net result is that the sub-index for household finances compared to one year ago fell by 6.5% to a reading of 83 — its lowest level since September last year.
“This is a disappointing update. Despite what appears to have been a well-received Federal Budget, consumer sentiment has continued to drift lower,” Evans said.
The survey was conducted over the week from May 7-12, with sentiment prior to the May 8 budget showing a reading of just 99.9 before a post-budget pick-up to 104.8.
It also included an extra question on the budget, asking respondents how they expected the budget to have an impact on family finances over the next 12 months.
“Responses indicate the Budget was relatively well-received. Just over 10% of consumers expected the Budget to improve their finances; 58% expected no change; 19% expected it to worsen their finances and 13% reported ‘don’t know’,” Evans said.
Evans said the long-term time frame of the budget’s tax cuts — with cuts to be phased in over seven years while lump sum refunds won’t be available until June 2019 — may also have served to temper sentiment.
“This result indicates that respondents expect tax cuts to be positive for the economy overall but have limited significance for their own financial position,” Evans said.
Elsewhere in the survey, sentiment towards housing continued to deteriorate as the “time to buy a dwelling” index fell to a six-month low. House price expectations also dipped slightly.
However, in the wake of Australia’s strong jobs growth, consumers continued to express more confidence about labour market conditions.
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