CONSUMER CONFIDENCE DOWN AFTER BUDGET SPECULATION

Written on the 6 May 2014

CONSUMER CONFIDENCE DOWN AFTER BUDGET SPECULATION CONSUMER confidence has sharply declined by eight per cent in the last two weeks, linked to Federal budget policy leaks according to the ANZ.

The ANZ-Roy Morgan weekly report shows a 4.2 per cent drop last week, coinciding with the Commission of Audit’s report and speculation around the deficit reduction levy.

Chief economist Ivan Colhoun says the figures provide a clear reading of the budget’s impact on consumers.

“The policies of most concern to the consumer spending outlook at this stage are the mooted temporary deficit reduction levy and the proposed changes to the eligibilities for welfare and pension payments.

“These policies, if introduced, would impact consumption both directly and indirectly,” he says.

In line with the results, consumer’s perceptions of economic conditions next year dipped more than 20 per cent in the past fortnight.

“This index will be important to watch for the likely magnitude of the policy’s indirect hit to consumer spending and how sustained the impact from any other budget-related news will be on consumer confidence more generally.”

Colhoun says the consumer spending outlook remains promising this year, with the budget outcome affecting the speed of the recovery.

The survey’s results echo ANZ’s Business Sales Trends report, which shows sales growth slowing to 3.5 per cent in the March quarter.

Sales are down from 4.8 per cent in the previous quarter following a strong Christmas period, while the lateness of Easter this year contributed to the decline.

Corporate and commercial banking general manager Michael Rose says it’s a reasonable start to the year however there is uncertainty with the budget.

“Some pockets of the economy are taking a wait and see approach and this could lead to confidence weakening further and risks to consumer spending.

“Small business is the sector most reactive to market conditions, but as the life blood of the Australian economy, it will be important to ensure we increase our support for entrepreneurship and innovation in Australian business,” he says.

Retail sales accounted for all of the slowing, particularly in food sales, whereas construction led the charge rising by 11.5 per cent.

“There are some positive signs starting to emerge, however with customers in some retail sectors such as household goods and hardware and some non-retail sectors like construction services, performing better.”

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