Consumer confidence has edged lower and concerns about jobs have grown as the RBA’s cash rate cut appeared to spark unease among households.
The Westpac-Melbourne Institute consumer sentiment index released on Wednesday dipped 0.6 per cent to 100.7 in June, cancelling the rise of the previous reading but remaining above the 100-point mark that separates optimism from pessimism.
“This is a disappointing result given the cut in official interest rates this month and suggests deepening concerns about the economy have outweighed the initial boost from lower rates,” Westpac economist Matthew Hassan said.
The Melbourne Institute’s report noted that “consumers appear cautious about the general economic outlook, especially the near-term conditions”.
The survey of 1,200 adults – conducted via phone interviews between June 3 to June 7 – picked up responses to the Reserve Bank of Australia’s cut on June 4 and the release of GDP figures on June 5.
“Responses collected before the June 4 decision had a combined index read of 106.8,” Mr Hassan said.
“Those collected after had a combined read of 95.5, with daily results showing a further softening after the weak GDP report,
The poll recorded a 0.2 per cent dip on whether it was “time to buy a major household item” compared to the previous month to 115.5 points – well below the long term average of 127.
“With readings on current finances also weak this suggests consumer spending is likely to remain weak near term,” Mr Hassan said.
Respondents’ views of the economy as a whole in the next 12 months dropped 4.7 per cent to a pessimistic 99.3, while their perception of their own family’s finances during that period edged up 3.1 per cent to 107 points.
The survey’s unemployment expectations index increased 5.1 per cent in June, indicating more people were worried about job losses rising in the year ahead.
“Expectations have been volatile in 2019, suggesting labour market conditions may be shifting. NSW and Victoria showed particularly sharp rises in June – both up 7.9 per cent,” Mr Hassan said.
He said survey replies indicated that households would “increase savings rates further in the months ahead” despite the RBA cutting interest rates to a record low of 1.25 per cent last week.
There was an increase in the number of respondents saying savings should be used to buy shares, up 2.1 per cent since March, although only 9.6 per cent as a whole called it the wisest option for excess funds – far below the 24.9 per cent who would place it in a bank and 24.7 per cent who would use it to pay off debt.
Property investment was the preferred choice of 10.4 per cent, while 7.1 per cent recommended placing extra cash in superannuation, and 6.3 per cent said spending it was the best thing to do.
Consumer confidence jumped 11.8 per cent in the month among survey respondents earning between $80,000 and $100,000 a year but fell 12.1 per cent for those in the $40,000-60,000 income bracket.
The poll also recorded a rise in sentiment in June among coalition supporters – up 7.5 per cent in the month following May’s federal election – and a 9.9 per cent slump among Labor adherents as well as a 3.8 per cent dip among non-aligned voters.
The ANZ-Roy Morgan consumer confidence survey also released on Wednesday was based on interviews conducted over the weekend.
It similarly noted a decline in sentiment and a slump in the “current economic conditions” metric.
“Weak Q1 GDP and the soft retail figure for April have seen consumer confidence move lower over the past week despite the rate cut from the RBA,” ANZ economist David Plank said, adding that cuts by the central bank in 2015 and 2016 also did not immediately boost optimism.