Westpac’s monthly “Redbook” is a detailed summary of the full range of questions that underlie the consumer sentiment survey they release with the Melbourne Institute.
While a lot of the talk has been about the negative impact of the budget there are two great charts in the Redbook which highlight the potential real-world effects of the crash in consumer sentiment over the past month.
Westpac constructs a composite measure of expected spending based on a combination of “sub-indexes tracking views on ‘family ﬁnances’ and ‘time to buy a major item’ with the Westpac Risk Aversion Index and provides a good guide to spending with a lag of about 6mths”.
What the data suggests is a looming crash in “spending growth this year from an estimated 2.9%yr in Q1 to around 1%yr by Q4 (an outright decline in per capita spend of about 0.5%)”.
Unless, they say, the budget reaction proves to be an overreaction.
It seems like things are going to be a bit quieter at the local real estate office if the responses to the question on “time to buy a dwelling” are any indication.
Westpac says that this index tumbled “6% to be 14.6pts below its long run average. The index is now down 25% from its Sep high and is at its lowest level since 2010. Note that the current slide in buyer sentiment is occurring with rates on hold – rate hikes are usually required to trigger this sort of downturn.”
The Australian economy is likely to now go through a flat spot – how quickly it recovers depends on how well the Government sells the budget to a wary public.
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