Despite improving conditions in the global economy local consumer confidence has fallen, as households remain concerned about the state of their own finances.
The Westpac Melbourne Institute Index of Consumer Sentiment fell by 1.6 percent last month, taking it from 96.1 in March to 94.5 in April.
This has brought the index to its lowest level since August last year, when consumers were concerned about imminent interest rate rises and the global economic outlook.
Westpac chief economist Bill Evans said the index slip came as a “mild surprise,” considering the improving state of the global economy and the Reserve Bank Governor’s promising hints at rate cuts.
According to the index, the standard variable mortgage rate had fallen by 0.4 percent in the past 12 months yet the confidence of respondents who held a mortgage had fallen by 14.6 percent.
This disparity was reinforced by the movement of the components of the index. The sub-index tracking views on family finances compared to a year ago slumped by 14.4 percent and the sub-index tracking expectations for family finances over the next 12 months fell by 4.1 percent.
By contrast, the sub-indexes tracking views on economic conditions over the next 12 months and economic conditions over the next 5 years rose by 0.8 percent and 1.5 percent respectively. The index tracking views on time to buy a vehicle also fell sharply by 4.9 percent, confirming that perceived financial concerns would influence respondents’ spending behaviour.
The results confirmed respondents were less concerned about the overall economic outlook, but remained agitated about the state of their own finances.
With the exception of July 2008- amid the Global Financial Crisis- the result of households’ assessment of finances compared to a year ago is the lowest since the recession in the early 1990s. As fears of a second global financial crisis have eased, the result has been attributed to concerns around job security, house prices, high debt levels, petrol prices and uncertainty around the imminent introduction of a price on carbon.
“The results of this survey should send a clear message to the Reserve Bank that Australia needs lower interest rates,” Evans said.
“We confidently expect the Board to lower rates by 0.25 percent and furthermore, we do not expect that move to be the last”.