Confidence Falls Sharply But Housing Optimism Rising

Westpac’s measure of consumer confidence fell 7.9% m/m in May after rising 9.4% in April and is now only slightly above the February/March low. All components were lower. Given the RBA’s surprise May rate hike, this development is unsurprising. Westpac also notes that the Budget weighed on sentiment too, as it seems people were hoping for more relief.

• Almost 70% of those surveyed expect rates to rise again over the next year with just over 40% expecting it to be by more than 1pp. This is up from 61% and 34% respectively in April following the RBA’s pause but down from November’s peak of 81.5% and 60%.
• The survey had been delayed a week to assess the impact of the Budget. Confidence before the May 9 Budget was 81.3 (-5.3% m/m) whereas afterwards it was down another 7.4% to 75.3. The largest post-Budget drops were in the groups most dependent on cost-of-living relief and mortgage holders. Westpac attributes around 60% of the total May drop to the Budget and the rest to the rate hike and other factors.
• 15.5% of those surveyed expect to be better off from the Budget and 27% worse off, which is a usual pattern.
• Renters, mortgage holders, low income consumers and women saw the sharpest falls in confidence. The news recently has been uniformly negative regarding the prospects for renters.
• The housing market bucked the trend with the “time to buy” rising 7.3% after 8.2% last month, despite house price expectations rising 10.7% and rates expected to rise further.
• Both past and future finances fell around 10%. The economic outlook fell over 9%. “Time to buy a household item” remains more depressed than the early 1990s recession.
• Consumers are still optimistic regarding the labour market but are gradually losing some confidence.
• See Westpac report here.

Source: MNI - Market News/Refinitiv/Westpac