Australia: Consumer sentiment deteriorates further – Westpac

The Westpac Melbourne Institute Index of Consumer Sentiment for Australia declined by 1.2% in August from 96.6 in July to 95.5 in August.

Key Quotes

“The consumer mood has deteriorated over the last year with August marking the ninth consecutive month where pessimists are outnumbering optimists. We have not seen such a succession of weak reads since 2008.”

“The survey detail suggests increased pressures on family finances; concerns around interest rates; and housing affordability in NSW and Victoria are more than outweighing increased confidence around jobs.”

“The further weakening in consumer sentiment comes despite some positives leading into this month’s survey. The RBA again opted to leave interest rates unchanged at its August meeting while the Governor sent a clear signal in a recent speech that rates were on hold in the immediate future. Other positives include: a continued improvement in labour market conditions; lower petrol prices (average pump prices down 15c/litre nationally since early June) and a booming Australian dollar, which briefly touched USD 0.80.”

“The Reserve Bank Board next meets on September 5. There is no doubt that the Board will continue to leave the cash rate on hold. The more interesting question is whether, as expected by markets and signalled by consumers’ responses in this survey, the RBA will raise rates next year. High business confidence and improving employment conditions along with the Bank’s own upbeat growth forecasts support the case for higher rates. On the other hand we continue to see evidence of a downbeat consumer and signs that the housing markets are set to slow under the weight of stretched affordability.”

“Our view is that these factors will slow growth and, along with an inflation rate which remains stubbornly below the Bank’s target zone, will preclude the need for higher rates next year.”