SYDNEY, March 13 — A gauge of Australian consumer confidence slumped in March to its lowest level in over a year as gloomy media coverage of disappointing economic news took a heavy toll on the national mood.
Today's survey showed the Melbourne Institute and Westpac Bank index of consumer sentiment fell 4.8 per cent in March, unwinding a 4.3 per cent jump in February.
The index, compiled from a survey of 1,200 people, was down 4 per cent from a year earlier at 98.8, meaning pessimists now outnumbered optimists. This sharply contrasted with the “cautiously optimistic” consumer mood through most of 2018.
One reason for the gloom was a sharp slowdown in the A$1.9 trillion (RM5.47 trillion) economy in the second-half of last year, in part due to a steeper-than-expected housing downturn.
The dour survey will be a setback for the central bank which last month tempered expectations for a future rate hike, saying the risks for a move on either side are now evenly balanced.
Despite the Reserve Bank of Australia's (RBA) doggedly neutral stance, many investors are now expecting a rate cut this year.
“We are mindful it may not take much additional weakness to trigger an easing from the RBA,” ANZ's head of Australian economics David Plank said in a note in which he removed a hike from the RBA's long-term rate outlook.
“Should it look as if the unemployment rate is trending higher, we think the RBA will act quite quickly,” he said.
ANZ sees the possibility of a policy easing as early as May although it's base case scenario is for rates to stay on hold through 2020.
The RBA has repeatedly said a strong labour market would boost household incomes and economy-wide spending, although some leading indicators of labour demand are now pointing to a bearish picture.
Gloomy media
In the consumer sentiment report, respondents appeared to be reacting to data showing the economy slowed sharply in the December quarter of last year, which many in the media referred to as a “per capita recession.”
“The survey detail indicates that this had a significant negative impact on confidence,” said Westpac senior economist Matthew Hassan. “Responses over the survey week show a marked drop-off after the national accounts update.”
He said responses collected before the March 6 release had a combined index read of 100.7, while those collected after the release had a combined read of 92.7, a drop of 8 per cent.
The RBA has recently noted the success fiscal stimulus has had during the 2008 global financial crisis while underlining the limits of monetary policy in boosting consumer spending when the official cash rate is already at an all-time low 1.50 per cent.
“We think fiscal policy has a clear role to play,” ANZ's Plank said.
“Indeed, with interest rates at record lows fiscal policy is a better option to stimulate the economy than yet more monetary easing,” he added.
Australia's centre-right government will deliver the federal budget on April 2 when it is widely expected to announce personal income tax cuts and infrastructure spending ahead of general elections due by May. — Reuters
