Consumer confidence has stumbled across the country as a result of the latest COVID-19 lockdown in Victoria.
The weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – has dropped 2.5 per cent.
The seven-day lockdown has seen confidence tumble 3.8 per cent in Melbourne, while there were even bigger falls in Sydney (down 4.5 per cent) and Brisbane (down 4.7 per cent).
ANZ head of Australian economics David Plank said past surveys show that short lockdowns don’t have a lasting impact on consumer sentiment.
“This offers the prospect that even an extension of the current lockdown may not have too dramatic an impact on consumer sentiment,” Mr Plank said.
“Of course, the absence of JobKeeper for this episode means we need to be alert to worse results than the experience to date.”
The JobKeeper wage subsidy ended in March.
The Reserve Bank holds its monthly board meeting on Tuesday and is widely expected to leave its key interest rates unchanged at a record low 0.1 per cent.
The bank has already flagged any changes to its bond targeting and buying program will be announced in July.
“The RBA is firmly in wait-and-watch mode,” leading economist Su-Lin Ong said.
“While it may note the current Victorian situation it will not likely do much more than that given the uncertainty. A more prolonged lockdown would be needed to alter its increasing confidence in the recovery.”
Meanwhile, the manufacturing sector continued to grow in May, fuelled by strong demand from the construction sector, a pick-up in business investment and healthy demand from households.
The Australian Industry Group performance of manufacturing index rose by a further 0.1 per cent in May to 61.8, an eighth consecutive month of recovery following last year’s severe disruptions from the impact of COVID-19.
“With capacity utilisation running at high levels and new orders continuing to grow, manufacturers are finding it increasingly difficult to fill positions,” Ai Group chief executive Innes Willox said.
“While the new Victorian lockdown will dampen enthusiasm somewhat, these conditions are likely to be setting the stage for a lift in investment by manufacturers.”
In its latest economic outlook, the Organisation for Cooperation and Development expects Australia to enjoy strong 5.1 per cent growth in 2021, but has warned this could be at risk if the COVID-19 vaccine is not widespread.