Daily Commentary BY THE CURVE TEAM –

Deteriorating Outlook Hits Consumer Confidence

12th of March, 2019

Confidence amongst Australian consumers is waning despite the prospect of rate cuts on the horizon.

When RBA Governor Lowe shifted the RBA’s rhetoric recently from ‘the next move in the cash rate likely to be up’ to the outlook being ‘more evenly balanced’, the prospect of rate cuts was touted as the main driver behind the uptick in consumer confidence.

Based on that assumption, you could conclude the miss from GDP, which has increased the probability of rate cuts, would provide a further boost in confidence. However, the latest update on consumer confidence suggests the GDP miss and what it means for the broader outlook actually has consumers worried.

The ANZ-Roy Morgan weekly consumer sentiment index released this morning saw the index fall 4.6% from a week ago.

Looking at the sub components and the biggest fall was consumer’s expectations for the economy over the year ahead, which fell 7.9% from the previous week. Consumers were also increasingly concerned over the long run prospects for the economy with the 5 years ahead index down 5.4%.

As a result, consumers were also more concerned about their own finances over the year ahead. The family finances for the year ahead was also down 5.4%.

It is a timely update on consumer sentiment ahead of this week’s monthly survey which is due out on Wednesday. The two survey’s tend to track one another so depending on when the monthly survey was conducted, we could see a similar fall in this week’s monthly survey.

David Flanagan

Director - Interest Rate Markets