Economy concerns outweigh policy boost.

The Westpac-Melbourne Institute Index of Consumer Sentiment dipped 0.6 per cent in June with Westpac senior economist, Matthew Hassan, describing it as a disappointing result given the cut in official interest rates this month.

“Deepening concerns about the economy have outweighed the initial boost from lower rates. The Reserve Bank’s move was widely anticipated and may well have ‘franked’ these concerns which have solidified further following the disappointing national accounts figures released a day later,” he said.

The March quarter GDP update showed growth slowing to just 1.8 per cent at the start of the year, the slowest pace since the GFC in 2009 and a full percentage well below ‘trend’ of 2.75 per cent.

“Attitudes towards spending were largely unchanged with the ‘time to buy a major household item’ sub-index dipping 0.2 per cent. The index has been stuck in a tight range well below the long run average. With readings on current finances also weak this suggests consumer spending is likely to remain weak near term.”

He said the surprising Federal Election result produced a strong rise in sentiment amongst Coalition voters, up 7.5 per cent in the month, but a sharper decline amongst ALP voters, down 9.9 per cent.

Where policy changes have generated by far the biggest shift is around expectations for house prices, with the Westpac-Melbourne Institute Index of House Price Expectations Index posting a spectacular 22.7 per cent gain in June, the highest level since August 2018, but still well below the long run average.

“All states recorded sharp rises and the mix suggests consumers see policy shifts as a clear positive for the price outlook but a more mixed result for buyers in terms of affordability,” he said.