Financial concerns are on the mind of consumers so much so the Westpac Melbourne Institute Index of Consumer Sentiment fell by 1.6 per cent from 96.1 in March to 94.5 in April.
Bill Evans, Westpac chief economist, said the index is now at its lowest level since August last year when consumers were very concerned about the global outlook and warnings from the Reserve Bank.
“This result comes as a mild surprise,” he said.
“With conditions in the global economy improving and commentators interpreting the Reserve Bank Governor's latest statement as hinting strongly that rates are likely to be cut next month it seems surprising that households would have a negative reaction in April.”
According Evans, there was great disappointment in the Reserve Bank which failed to deliver a much needed rate cut but the guidance from the Governor's Statement was quite encouraging.
Other factors that influence confidence appeared to have a mixed impact in April with the share market up 3.3 per cent; the Australian dollar down 2c against the US dollar and petrol prices up 5c to $1.50 a litre.
“There is a very disturbing message in the movements of the components of the Index,” Evans said.
Attitudes towards purchasing housing and motor vehicles deteriorated. The index tracking views on "time to buy a dwelling" was down by 0.3 per cent but at a relatively solid overall level while the index tracking views on "time to buy a vehicle" fell sharply by 4.9 per cent, possibly reflecting recent petrol price rises.
Respondents' spending behaviour is likely to be considerably influenced by how they assess their own finances. As such, the very weak reads in April are of significant concern.
“With fears of rising interest rates or a second global financial crisis having eased we can only conclude that concerns around job security; house prices; high debt levels; petrol prices; utility costs; and uncertainty around the imminent introduction of a price on carbon, are weighing heavily on households' concerns about their financial position,” Evans said.
“The results of this survey should be sending a very clear message to the Reserve Bank that Australia needs lower interest rates. The Board will get its chance to deliver a lower overnight cash rate at its next meeting on May 1.”
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