For the third consecutive month, the Westpac-Melbourne Institute Consumer Confidence Index dropped - this time by 4.2% from 100.8 to 96.6.
A score over 100 generally implies Australian consumers remain confident about the economy and the outlook of their finances, however recent events both domestically and internationally are having an effect.
Westpac Chief Economist Bill Evans said the latest monthly fall comes as no surprise.
“The war in Ukraine, the floods in South-East Queensland and Northern NSW, ongoing concerns about inflation and higher interest rates were all likely to impact confidence, although the size of the decline is still notable,” Mr Evans said.
To gather data for the index, consumers are asked each quarter to recall their views on recent news coverage across a range of topics, with inflation seemingly exploding.
“A year ago, just 8.6% of respondents recalled news on inflation, with that proportion jumping to 38.7% in March, a 14 year high” Mr Evans said.
“Inflation issues already look to be weighing on both finances and spending intentions.
“The component ‘finances vs a year ago’ sub-index fell by 3.9%, no doubt partly reflecting the recent weakness in the share market and the 25% lift in petrol prices since the beginning of the year, compounded by the fear that there is a lot more to come.”
Earlier this week, ANZ-Roy Morgan Consumer Confidence Index noted just 14% of Australians expect ‘good times’ for the Australian economy over the next 12 months compared to 25% that expect ‘bad times’.
The Westpac-Melbourne Institute Consumer Confidence Index noted Australian’s confidence in the housing market is deteriorating sharply.
The ‘time to buy a dwelling’ index fell by 7.7% to 78.3, down 40.6% from its recent peak in November 2020.
“The latest fall was most pronounced in NSW where the state index dropped 13.4% to be 10-15% below the other major states,” Mr Evans said.
CoreLogic's national Home Value Index released Tuesday revealed the lowest monthly growth reading in housing value since October 2020 at 0.6% with Sydney posting the first decline in housing values since September 2020.
Mr Evans noted the national index is now at its lowest level since February 2008, during the Global Financial Crisis and well below the 90-95 levels seen in 2017–18, when housing markets experienced a slight dip.
Westpac forecasts national measures of dwelling prices to begin falling in the December quarter following rate increases from the Reserve Bank in August and October.
Westpac maintains the view that the first cash rate increase will take place in August 2022, following two more inflation reports on 27 April and 27 July.
“The [RBA] Board is currently in a holding pattern, awaiting more data, particularly on inflation, wages growth, and the unemployment rate,” Mr Evans said.
In a speech Wednesday, RBA Governor Phillip Lowe said given recent global developments, scope exists to wait and assess incoming information and see how uncertainties are resolved [inflation, wages and unemployment].
"The RBA can be patient in a way that countries with substantially higher rates of inflation cannot," Mr Lowe said.
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