The Westpac-Melbourne Institute Consumer Sentiment Index fell by 5.7 per cent in June to 101.9 from 108 in May.
Westpac's chief economist, Bill Evans, said it was the biggest drop since March 2008.
“Following the seven per cent fall in May, the cumulative 12.3 per cent fall in the index over the last two months represents the largest two month fall since March 2008,” he explained.
“At that time the Reserve Bank had raised rates on two consecutive occasions pushing the variable mortgage rate to 9.35 per cent and the global financial crisis was deepening.
“We expect that the fall in May was largely due to the Reserve Bank's decision to raise rates for the third consecutive month this year. With the bank leaving rates on hold in June, the decline in sentiment this month may not be due to rates. Instead it seems to reflect a mixture of concerns about deteriorating conditions abroad, financial market turmoil and uncertainty around the Government's proposed resource super profits tax.”
Movements in other components of the index were more subdued as expectations for economic conditions over the next five years dropped nine per cent, swinging from a small positive to a small negative; expectations for family finances over the next 12 months fell 4.2 per cent; and opinions on whether it was a ‘good time to buy a major household item’ slipped 2.2 per cent; but consumers’ short-term outlook for the economy improved with expectations for ‘economic conditions over the next 12 months’ rising 2.8 per cent.
The spending intentions measures in this survey have been quite resilient. The component ‘whether now is a good time to buy a major household item’ is only down 5.6 per cent over the last two months. ‘Time to buy a dwelling’ rebounded 7.3 per cent from its 15.4 per cent slump in May and ‘time to buy a car’ rebounded 1.6 per cent from a 6.4 per cent fall in May.