Australian consumers are feeling down in the dumps.
If the latest ANZ-Roy Morgan weekly consumer confidence index is anything to go by, households are becoming increasingly concerned about the state of their finances and the broader economy.
Last week the index fell by 2.2% — a relatively sharp drop which followed falls of 1.8% and 4% in the previous two weeks.
August has been a rough month, and the index now sits at 109.2 — well below the reading three weeks ago of 118.3 and less than the long-term average of 112.9.
Data for the survey is collected on the most recent weekend, and is based on around 1,000 face-to–face interviews.
While all of the major sub-indexes fell last week, consumers appear to be growing increasingly pessimistic on their future outlook.
Views towards current household finances fell by 2%. Looking ahead though, expectations for future financial conditions crashed by 5.3%.
Likewise for the broader economy, views on current economic conditions fell for the third straight week by 1.5%. But for future economic conditions, the index sunk by 6.8%.
Developments in Parliament could be partly to blame, according to ANZ’s head of Australian Economics, David Plank.
“The current controversy surrounding dual-citizenship in Parliament may have also weighed on sentiment, especially views about future economic conditions,” Plank said.
While a range of indicators such as manufacturing and service PMIs, business sentiment and jobs growth suggest that the Australian economy is broadly on track, the good news isn’t flowing through to consumers.
In fact, despite some volaitity in recent weeks the economic sub-index is now sitting near the lowest level on record.
Not great, and despite steady improvement in the broader economy it’s clear that other factors are weighing on the Australian consumer.
The increase in energy costs effective from July 1, record high household debt appear to be taking their toll.
But the low-wage growth story likely remains the key driver for weak consumer sentiment. Wage growth last week once again came in sluggish, and until Australians see some more money flowing through to the hip pocket consumer sentiment is likely to continue its divergence from other key indicators.
That’s the view of ANZ’s Plank, who noted that consumer confidence is now at its lowest level since 2015.
“Overall, despite a strong labour market and robust business conditions, we believe that any recovery in consumer confidence is likely to be capped until households experience a material acceleration in wage growth,” Plank said.
“Last week’s wage report showed a disappointing deceleration in private-sector wage growth. Though the larger-than-usual minimum wage hike will boost reported wage growth in Q3, we believe that any increase further out is only likely to be gradual, given the level of spare capacity in the labour market.”