Curve Daily Commentary, April 22, 2015

Confidence Fading Ahead of Budget 

It appears that the anxiety over the budget and ongoing worries over employment continue to weigh on consumers according to the latest weekly update on consumer confidence. This time last year, confidence was hovering around its long run average according to both the popular measures of confidence after it had eased back from its late 2013 highs. This year we are already seeing confidence pull back even before any leaks of this year budget are bandied around the main stream media.Confidence Fades

The down trend in the ANZ-Roy Morgan weekly index hit its lowest level in 8 months, the period when confidence was slowly recovering following last year budget. Consumers perceptions of the economy continue to weigh the most of confidence. The one year outlook now sits just above the budget induced low from last year while the 5 year outlook is holding up a little better. Consumers view on their own finances, both against a year ago and for the year ahead, were both lower over the week however sit around the same level they have been since the start of the year.

This suggest that the government’s budget focus should be on policies to underpin growth and restore consumers confidence in the outlook for the economy, rather than focused on putting more money in people’s pockets.

Today we get the all important inflation figures for the first quarter. The market is currently expecting a very marginal increase in the headline rate, which will see the downtrend in the annual rate continue. The core rate of inflation is expected to rise in line with the recent trend which will see the annual rate remain at the bottom end of the RBA’s 2-3% target range, having little impact on the outlook for monetary policy.

Despite the poor reading on consumer confidence, Stevens comments Monday night have seen the markets expectations for further interest rate cuts be pared back even further. The market now only has one more cut fully priced in for the third quarter this year.