Consumers, businesses still wary about the future
Poppy Johnston |
Another interest rate hike has flattened the consumer mood, with businesses also nervous about the future despite a still-resilient economic climate.
The Westpac and Melbourne Institute monthly consumer sentiment survey has detected a sharp fall following the Reserve Bank’s decision to lift interest rates by another 25 basis points in November.
The index fell by 2.6 per cent to 79.9 index points in November, down from 82 in October.
Respondents reported feeling a little more optimistic heading into the November 7 meeting before sentiment sunk six per cent after the widely expected increase to the official cash rate.
Westpac senior economist Matthew Hassan said the additional tightening had renewed pressure on family finances.
“Previous months had been showing some tentative signs that sentiment was starting to lift out of the deep pessimism that has prevailed since the middle of last year,” he said.
“That rally looks to have been cut short before it even really began.”
The fall in the index was driven by a sharp deterioration in expectations about the future of family finances, which dropped 7.3 per cent.
The weekly ANZ and Roy Morgan index also weakened in the wake of the rate hike, sinking 3.5 index points to 74.3.
Australian businesses also remain pessimistic, with National Australia Bank’s monthly survey recording a three point fall to negative two index points in October.
Conditions for running a business improved one point to 13 index points, according to the survey released on Tuesday.
NAB chief economist Alan Oster said the generous gap between conditions and confidence had persisted over the course of a year.
“Businesses clearly remain cautious about the outlook for the economy despite the resilience we are seeing,” Mr Oster said.
Yet forward-looking indicators, such as capacity utilisation and forward orders, both fell over the month.
The monthly survey also picked up a welcome slowdown in price and cost growth.
Mr Oster said inflation was expected to keep moderating but slowly, with resilient domestic demand so far keeping pressure on prices.
Consumer spending has been weakening, however, and the usually busy festive season is expected to be softer.
The Westpac-Melbourne Institute consumer confidence survey found nearly 40 per cent of respondents planned to spend less on gifts than last year.
St George senior economist Jarek Kowcza said it would take some time before consumer confidence regained its lost ground.
“More progress on inflation and a clearer view on the interest rate outlook will likely be necessary prerequisites for a material uplift in confidence,” he said.
Unemployment expectations, which basically samples views on the future trajectory for joblessness rates, have been broadly stable since June.AAP