Daily Commentary BY THE CURVE TEAM –

Consumer Sentiment Remains Soft

23rd of January, 2020

Further declines in consumer sentiment for January highlight that challenges continue for the RBA at the start of 2020.

The first monthly read on Consumer Sentiment for 2020 fell as was widely expected. The market consensus being that this is the first tangible economic data to show some effect of the recent bushfire crisis around the nation. Whilst it must be said, the economic impact pales in comparison to the human cost of the fires, the economic impact cannot be dismissed.

Highlighted in the Westpac survey, the 1.8% month on month decrease is significantly smaller than the most recent large-scale disaster in Australia with the 2011 Queensland floods saw a near 6% decline in the survey so further falls in the months ahead as the fires continue cannot be ruled out.

For the RBA, the survey demonstrated a few of the key challenges facing the economy.

Expectation for economic conditions both 1 and 5 years forward remain in decline. That is, it now appears despite an increase in expected wealth through asset price inflation, consumers do not expect to see any carryover to the wider economy. With market pricing currently a coin toss for a February rate cut by the Board, the market certainly sees upside risk to asset prices should the board choose to lower the cash rate a further 25bps.

Matthew Dunshea

Client Relationship Manager