The Westpac-Melbourne Institute Consumer Confidence Index fell 7.9% in May to 79.0, with the sharpest falls seen amongst those on low incomes, renters, mortgagees and women.
The index revealed the views of Aussie consumers towards the state of their finances reversed gains made in April, with the ‘finances compared to a year ago’ sub-index dropping 10% and the ‘finances, next 12 months’ sub-index falling 10.2%.
Further, the ‘economy, next 12 months’ sub-index dropped 9.5% and the ‘economy, next 5 years’ sub-index fell 9.2%.
Westpac Chief Economist Bill Evans said sentiment amongst those surveyed before the Budget announcement showed an index read of 81.3, down 5.3% compared to April, while sentiment amongst those surveyed after the announcement came in at 75.3, down an additional 7.4%.
"A strict interpretation would attribute about 60% of the May fall to the Federal budget and the remaining 40% to the interest rate decision and other factors," Mr Evans said.
"That is probably being too harsh on the Budget. Sentiment typically dips between pre- and post-Budget surveys.
"Some consumers may also have had unrealistic expectations going into Budget 2023 – especially around the scope to deliver cost of living relief without adding to the task of reining in high inflation."
Mr Evans notes overall the May Consumer Sentiment Index is sending mixed messages to the RBA Board, as attention turns to the guessing game of whether or not the RBA will pursue another cash rate increase 'surprise' in June.
"On the one hand, consumer sentiment is back near the historic lows we have only really seen on a sustained basis in the deep recession of the early 1990s," he said.
"The entrenched pessimism is clearly reflecting intense pressure on household disposable incomes resulting from high inflation and the sharp rise in interest rates. This signal is apparent in actual activity with a range of spending indicators now pointing to a sharp slowdown.
"On the other hand, the survey continues to show resilience around labour market conditions and signs of renewed confidence in the housing market. Both were cited in the Board’s surprise decision to raise rates in May."
Westpac anticipates the RBA will replicate April's decision to pause in June, awaiting further incoming data on inflation.
ANZ Consumer Confidence Index reaches lowest level since April 2020
ANZ’s weekly Consumer Confidence Index published in collaboration with Roy Morgan has recorded its lowest print since April 2020, falling to 75.9 in the past week.
For reference, a score below 100 indicates consumers are pessimistic regarding their finances and the confidence in the Australian economy.
ANZ-Roy Morgan Australian Consumer Confidence fell 1.8pts to its weakest since Apr 2020, sitting below 80 for an 11th straight week. Notably, ‘current financial conditions’ fell to its lowest on record since 2001. #ausecon @AdelaideTimbrel @arindam_chky @RoyMorganAus pic.twitter.com/ULWbflwsrd
— ANZ_Research (@ANZ_Research) May 15, 2023
ANZ Senior Economist Adelaide Timbrell noted the decline from 8 May to 14 May marked the 11th consecutive week the index remained below 80.
“‘Economic conditions’ perhaps rose, in part due to the announcement of the surplus in the Federal Budget on 9 May,” Ms Timbrell said.
“Confidence fell for both present and future financial conditions and the sub index for whether it is a ‘good time to buy a major household item’.
“Notably, ‘current financial conditions’ fell to its lowest value on record since 2001.
“Among the housing cohorts, confidence fell 4.1% for those renting and 2.2% for those paying off their homes, while it rose 2.0% for those who own their homes outright.”
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