The Westpac-Melbourne Institute Index of Consumer Sentiment fell 5.2% in June, with the index falling 9.7% over the last two months.
The latest fall was almost certainly due to concerns around the two-week lockdown in Melbourne, according to Westpac chief economist, Bill Evans.
“In this survey we saw a fall of 7.5% in Victoria, 4% in Queensland, 9% in Western Australia and 10.9% in South Australia, however the index in NSW fell by a meagre 1.1% highlighting the confidence the state has in its capacity to contain the virus. Sentiment in NSW is now 15.4% above Victoria; 11% above Queensland; 19.3% above Western Australia; 14.4% above South Australia and 29.6% above Tasmania.
“That resilience in NSW, our largest state, will be very important for supporting national sentiment and, in turn, sustaining the economic recovery,” he said.
All components of the index fell in June, most moving back into line with their levels in January.
The ‘time to buy a major household item’ sub-index fell 4.1%. This sub-index which underperformed during the period earlier in the year, when the overall index reached an eleven-year high, continues to signal that the 12.5% lift in spending on durables over the last year is likely to slow in 2021, Evans said.
Housing-related sentiment continues to show significant signs of stress too, with the ‘time to buy a dwelling’ index recorded its fifth monthly decline in a row, dropping 7.1% in June, 27% below its November level, sitting in outright pessimistic territory for the first time since April last year, and prior to that, late 2017, when housing was entering a difficult period marked by slowing activity and falling prices, particularly in Sydney and Melbourne.
“Surging prices and rapidly deteriorating affordability are clearly starting to weigh heavily on buyers, suggesting owner occupier activity, particularly first home buyers, is likely to fade. Victoria was again a standout, with buyer sentiment recording an 11% drop in the month and a 24% slump over the last two months,” Evans said.