The Melbourne Institute consumer sentiment index rose just 0.2% in June, holding firm on a sustained basis of its near recession lows for the past year. While the full survey showed little net change in sentiment, responses showed a significant impact from the rate rise.
“Overall, interest rates are not the most troubling issue for all households. News items that resonated most were inflation (62%), budget and taxation (43%), economic conditions (40%), employment (32%) and interest rates (27.6%),” Westpac chief economist, Bill Evans said.
However, the next five years’ sub-index posted its biggest monthly gain, with a solid 6.3% rise in the wake of a sharp 9.2% fall in May, a component that has held up much better than others through the current weakness, according to Evans.
But attitudes towards major purchases soured again in June, falling back to near the extreme lows seen in February and March. The ‘time to buy a major household item’ sub-index fell 6.5% with buyer sentiment not surprisingly extremely weak across the mortgage belt, and also amongst women and those aged over 45.
And there is concern around jobs, which has been the single bright spot in otherwise bleak consumer surveys over the last year which looks to be fading fast, led by those working in the education and hospitality sectors.
Despite the unexpected increase in the cash rate, expectations for house prices stayed positive while consumer risk aversion hit new record highs in June. “Updates on our ‘wisest place for savings’ questions, run every three months, show safe-havens and paying down debt are very heavily favoured. Well over half of all consumers nominate either ‘bank deposits’ or ‘pay down debt’ as the wisest place for savings,” Evans said.