This fall in confidence has impacted consumer perceptions towards riskier asset classes, particularly property, as places to store their money.

When asked about the ‘wisest place for savings’, over two-thirds of survey respondents favoured ‘safe’ options like bank deposits (e.g. savings accounts or term deposits), superannuation or paying down debt.

Only 8% of respondents favoured shares while 9% favoured property – the lowest percentage for property since records began in 1974.

Westpac Senior Economist Matthew Hassan said these responses suggest risk aversion among consumers has risen further.

“The mix is more risk averse than at the height of the global financial crisis in 2008 and highlights the risk that a move by households to increase savings rates could further undermine consumer demand.”

Pessimists now the majority

The overall consumer sentiment index fell 4.8% this month into ‘cautiously pessimistic’ territory, meaning pessimists now outnumber optimists.

This is the lowest level the index has been at since September 2017.

Mr Hassan said the downturn in Australia’s housing market seems to have had a direct impact.

“Consumers in Sydney, which has seen the largest house price declines over the last 18 months, recorded a sharp 10% fall in sentiment,” he said.

“Those working as labourers or operators also recorded a particularly sharp 14% decline, likely reflecting the significant weakening in dwelling construction.”

Consumers are also feeling significantly less optimistic about the future of their family finances, with the ‘finances next 12 months’ sub-index down 5.9% in March.

Falls of this sub-index were more pronounced in NSW (-11%) and Victoria (-9%), which reflects the pessimistic expectations that homeowners in those states have toward the direction of property prices over the next year.

Around half of consumers in NSW and Victoria expect house prices to be lower in a year’s time.

However, the recent slide in property prices has lifted the ‘time to buy a dwelling’ index to a four year high.

Mr Hassan said this index has now risen 30% from its low in mid-2017, but remains below its long-run average.

“Improving affordability continues to see a lift in buyer sentiment in NSW and Victoria although there still looks to be some way to go on affordability before buyer sentiment returns to ‘normal’ levels,” he said.

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