Consumer confidence tanked around the Budget in May and as Malcolm Turnbull noted yesterday the problem for the Government has been an inability – so far – to sell the changes.
The impact is evident in the government’s polling numbers but equally in the lack of bounce we have seen in consumer confidence over the last two weeks.
This morning the ANZ-Roy Morgan Weekly Consumer Confidence number showed a fall of 0.3% in the week to Sunday June 29.
Sure, confidence is 6% higher than it was was at the recent low but as ANZ Senior Economist Savita Singh points out in a note accompanying the release, “confidence still remains a solid 9% lower than at the end of April”.
More tellingly however – and something that will be troubling the RBA – is that confidence is not bouncing as it should.
The pace of recovery and the level at which confidence eventually settles will be important factors in determining the likely impact on household consumption growth, with anecdotes suggesting consumer spending activity in recent months has been soft. The bounce we have seen so far has not been large enough to make us comfortable that the deterioration in confidence is transitory. We would need to see confidence recover at least another 5% over the next few months to suggest that the non-mining recovery remains on track.
That’s bad news for the economy – maybe the RBA should cut rates today to try to reverse the spiral.