The first full week of the election campaign has had little to no impact on confidence levels of Australian households.
The latest ANZ-Roy Morgan consumer confidence survey revealed confidence levels rose by 1.1% to 115.1 last week, leaving the index above its long-run average of 112.8 for a third consecutive week.
As opposed to recent political developments, ANZ put the improvement down to a delayed reaction to the decision from the RBA to cut official interest rates to a record-low level of 1.75% on May 3, something that fits with the impressive bounce seen in the separate Westpac-MI consumer sentiment index for May released last Wednesday.
According to ANZ, all of the strength was concentrated in sentiment towards Australia’s economic outlook.
The survey’s subindices measuring perceptions one and five years ahead rose by 6.1% and 3.3% respectively, helping to offset renewed weakness in sentiment towards current and future finances in the year ahead which slid 1.8% and 0.6% apiece.
The final component of the index — whether now was a good time to buy a major household item — fell by a modest 0.6% following a far larger increase in the previous survey.
Along with the delayed reaction to the RBA rate cut, Felicity Emmett, head of Australian economics at ANZ, suggests recent strength in Australia’s stock market likely contributed to the bounce in sentiment levels.
“Consumer confidence rose last week in what we expect was a drawn-out reaction to the previous week’s interest rate cut from the RBA. Stronger equity markets were also likely helpful in lifting confidence,” wrote Emmett.
“With news on the election battle quite mixed over the past week, we expect that there was little impact on sentiment. With such a long election campaign, however, it will be interesting to see how quickly voter fatigue sets in.”
Besides the potential for politics to influence sentiment levels over the period ahead, Emmett believes that upcoming domestic economic data will be influential given the clouded economic outlook.
“With the economic outlook still quite uncertain, we expect that confidence will remain sensitive to developments in the domestic economic data, as well as the evolution of the political debate in the lead-up to the July election.”
On the domestic economy, households will receive two key economic data releases over the next two days with the release of Australia’s March quarter wage price index on Wednesday — something that fell to a record low level in the prior quarter — along with the April jobs report from the ABS on Thursday.
Collectively, both will impact those Australians in the labour market, and likely household confidence levels as a result.