More political chaos in Canberra sees Australian household confidence plunge to a 13-month low

(Marcelo Endelli / Getty Images)
  • ANZ’s weekly measure of consumer confidence just slumped to its lowest level since September 2017.
  • ANZ’s David Plank cited higher petrol prices and uncertainty stemming from the Wentworth by-election as the key catalysts of the fall.
  • After tracking sideways for a number of weeks, all the major sub-indexes posted sharp declines in a result which casts some doubt on the resilience of Australian households.

Sentiment among Australian households plunged last week, as another round of political uncertainty weighed sharply on the outlook.

The ANZ-Roy Morgan weekly gauge of consumer confidence slumped by 6%, with heavy falls across all of the major sub-indexes.

At a reading of 112.3, the measure has fallen below its long-run average and now sits at its lowest level in more than a year.

Despite the combined negative forces of low wage growth, high household debt and falling house prices, ANZ’s confidence measure had been tracking sideways for a number of weeks.

However, the Wentworth by-election over the weekend appears to have been the catalyst for a heavy dose of pessimism among households.

In a disaster for the Morrison government, Independent Kerryn Phelps is favoured to win election in the former Liberal stronghold after postal votes are recounts are completed.

The Coalition would then lose its one-seat majority in the House of Representatives, and the result “may have highlighted political uncertainty in the public mind,” said ANZ’s David Plank.

It comes just two months after former Prime Minister Malcolm Turnbull was removed from office — an event which also prompted a spike in negative sentiment among consumers.

Plank added that petrol prices — which have now risen above decade highs — “may also be impacting sentiment”.

“There was no glimmer of better news in the sub-indices, with all confidence measures down sharply,” Plank said.

Confidence around household finances over the next 12 months slumped by 7.1%, while views towards future financial conditions fell by 3.4%.

And sentiment towards the broader economy was no better. Views towards current economic conditions fell by 5.4%, continuing an ongoing downtrend. Sentiment towards future economic conditions slumped by 6.5% and remains stuck well below its long-term average.

Not even last week’s relatively strong jobs report — which saw unemployment fall to a six-year low of 5% — was enough to offset the wave of negative sentiment.

The “time to buy a household item” index plummeted by 7.8%, and now sits at its lowest level in three years.

Demand for big-ticket items such as fridges and furniture has now been in decline for a number of months, and analysts at Morgan Stanley have linked the falls to the ongoing declines in Australian house prices.

Add it all up, and the latest result will cast some doubt on the resilience of Australian households amid numerous headwinds — and by extension the outlook for domestic consumption.

With no key data on the schedule this week, Plank said it will “provide clear air for even more focus than usual on political developments — as if an excuse was needed”.

ANZ’s weekly measure of consumer confidence is based on around 1,000 face-to-face interviews conducted over Saturday and Sunday of the previous weekend.

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