- ANZ’S weekly gauge of consumer confidence fell by more than 3% last week.
- ANZ economist David Plank said the effect of falling house prices could be starting to drag on sentiment.
The ANZ-Roy Morgan consumer confidence index fell sharply last week after a solid run of gains.
The bank’s Head of Australian Economics, David Plank, partly attributed the result to increasing uncertainty about the housing market.
After six consecutive weekly increases either side of the federal budget, the measure dipped by 3.2% to a reading of 117.7.
Sentiment towards household finances and the broader economy both declined.
While the reading is subject to weekly volatility, Plank highlighted the falls in views towards household finances as an area of particular concern.
Views towards current financial conditions fell by 2.7%, reversing the previous two weeks’ gains.
Looking ahead, views towards household finances over the next five years slumped by 4.1% to a reading of 122.5 — the lowest level since November last year.
“The fall in views towards financial conditions is a little worrying,” Plank said.
“This could reflect homeowners’ concerns about falling house prices, particularly in Sydney and Melbourne.”
“Moreover, these concerns are likely exacerbated by the high existing household debt level and expectations of lacklustre wage growth in the near future.”
The results suggest that the outlook for housing is beginning to influence consumer behaviour, with the market slowdown now into its eighth month after Sydney home values first dipped last September.
That’s somewhat at odds with the views expressed yesterday by RBA board member Ian Harper, who said the central bank could still raise interest rates even if house prices continue falling.
But the ANZ data indicates that changes in home values remain a central factor in the outlook for Australia’s economy.
An extended housing market downturn, combined with consistently low wage growth, is likely to put more downward pressure on the outlook for domestic consumption — the biggest component of GDP.
Despite that, Plank said that although sentiment towards household finances fell last week, the readings for both current and future financial conditions remain above their long-term average.
He also noted that a pullback in the results was to be expected at some point, given that the reading had posted six straight weeks of gains.
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