The shifting sands of consumer confidence moved again in December with the Westpac-Melbourne Institute Index of Consumer Sentiment recording a 1.9% decline.
According to Westpac chief economist, Bill Evans, the Index has fallen 6.1% since the Reserve Bank started cutting the cash rate in June, indicating pessimists have outnumbered optimists throughout the second half of the year.
“This poor performance of the index is broadly consistent with the sharp deterioration we saw in consumer spending in the September quarter as reported in the national accounts and the early evidence of weak retail conditions for the start of the December quarter,” he said.
“Responses to additional questions on news recall showed that the highest recall for the month was news on interest rates (21.5%), and here the results were surprising. The Reserve Bank cut the cash on 10 occasions between November 2011 and August 2016 and during these periods consumers’ assessments of interest rate news showed a favourable/unfavourable mix of around 50/50.”
The ‘time to buy a major household item’ sub-index fell 2.1% in December, 3.7% down on last year and suggests consumers will continue to keep a tight rein on discretionary spending, Evans said.
Housing-related sentiment was mixed in December, with views on time to buy weakening sharply but price expectations continued to rise.
Reserve Bank governor Philip Lowe also noted that while consumers may not be spending the benefits of lower rates directly, they are repairing their balance sheets with a view to spending at a later date.