Consumers Pessimistic, Budget “Relatively Well-Received”

Westpac consumer confidence for May fell 0.3% m/m to 82.2, the third straight fall. Households continue to remain extremely pessimistic. The response followed the May 7 RBA meeting and its upward revision to 2024 inflation and the May 14 budget which included cost-of-living relief which Westpac says was “relatively well-received”. The data signal that consumption is likely to stay very weak with most of the upcoming tax cuts being saved.

• Inflation remains household’s main concern and as a result over half expect rate hikes to resume over the next year due to the higher-than-expected Q1 CPI and more hawkish sounding RBA. Rate hike fears eased post the budget despite being stimulatory.
• Before the budget sentiment was up 5.3% m/m whereas afterwards responses were down 7.4% more in reaction to the soft economic outlook rather than the fiscal measures, according to Westpac. Normally a net 20-25% believe they will be worse off after the budget, whereas this year it was only 3%, the lowest in 14 years ex Covid. 18% expect to benefit.
• 37% of those surveyed expect to pay less tax from July 1 with 27% expecting no impact. Of those anticipating a tax cut, 30% plan to save all of it and 50% at least half. Westpac estimates that around 80% will be saved, which would boost spending by 0.35pp.
• Current assessments of finances and the economy deteriorated offsetting the better outlook.
• The “time to buy a major item” fell 2.8% m/m to 76.5. It is rare to sit below 80.
• Unemployment expectations rose 4.1% to be just above the historical average driven by NSW and Victoria.
• Households continue to say it is a terrible time to buy a house while expecting well-above -average price rises.

Source: MNI - Market News/Refinitiv