Australia: Consumer mood slipped back into ‘cautiously pessimistic’ territory - Westpac

The Australian consumer mood has slipped back into ‘cautiously pessimistic’ territory, unsettled by a poor start to the year for economic growth, more ‘targeted’ interest rate rises and ongoing concerns about where both interest rates and housing markets may be headed next, according to analysts at Westpac.

Key Quotes

“The main themes from the Westpac– Melbourne Institute Consumer Sentiment survey are familiar – concerns centred around family finances and housing; risk aversion elevated; spending indicators either weak or subdued; and job loss fears still elevated.”

“What is harder to judge is whether the results are better or worse than might have been expected. On the ‘could have been worse’ side: the reaction to higher rates for ‘interest only’ mortgages was muted (sentiment across the wider mortgage belt even lifted) and May’s Budget looks to have been a non-event sentiment-wise (a good result given recent years although no doubt disappointing for a government hoping to generate some positivity).”

“Add to this what appears to be a limited fall-out from increased risk aversion in terms of savings, spending and household balance sheets – and perhaps the picture is not so bad after all.”

“On the ‘could have been better’ side though is: a more positive global and business confidence backdrop; interest rates near historical lows; big gains in household net worth; a housing market that has not crumbled in the way many had feared; a dissipating drag from the mining investment downturn; and official labour market estimates showing solid signs of improvement.”

“Depending on your point of view, the end result – a headline index of 96.6, not overly weak but firmly in the bottom third of results over the last 40yrs – is either a disappointing relapse into negative or a promising sign of resilience. Either way though, it is not sending any encouraging signals about the near term outlook for consumer spending. With the full impact of macro-prudential measures still to play out, the outlook still looks to be ‘slow and unsteady’.”