A widely-watched survey shows Australian households are pessimistic about the economy’s long-term outlook.
The Index of Consumer Sentiment by Westpac and the Melbourne Institute rose by just 0.3 per cent in April to 99.7.
That is below the key 100-point-level which indicates optimists outnumber pessimists.
Westpac senior economist Matthew Hassan says he was expecting a better rebound than the fairly flat result for April.
“The March survey was conducted in the midst of quite a bit of bad news, particularly around the Qantas decision to reduce staffing, and that seemed to impact consumer views around the labour market and expectations for the economy,” he explained.
“So, with that news sort of calming down a little bit we were expecting to see a bit of a pick up in sentiment.”
The latest report suggests that while people are feeling better about their household finances, they are reluctant to actually go out and spend.
Mr Hassan says there is a lot of positivity about household budgets, but that is not translating into spending on big ticket items, or even small purchases.
“Against that we’ve still got this very weak read around unemployment expectations and this month we’ve also seen some notable drops in indexes that track attitudes towards whether it’s a good time to buy a major household item and whether it’s a good time to buy a house,” he observed.
While unemployment expectations eased a little this month, the index is still 12.4 per cent higher over the past year, indicating that Australians are very worried about their job security – the most likely reason that many are reluctant to open their wallets.
The index on whether now is a good time to buy a major household item slumped by 8.7 per cent to its lowest level in almost two years.
The proportion of people who think now is a good time to buy a house has also dropped 20 per cent from the most recent peak in September, led by a 39 per cent fall in Victoria, which slumped 19 per cent in April alone.
Mr Hassan says such figures vindicate the Reserve Bank’s wait and see approach to interest rates.
“It definitely supports this on-hold position that the RBA has taken. The overall readings around sentiment indicate that the consumer’s not really taking off,” he said.
“Again, I think that underscores that we need to maintain current policy settings, and there’s certainly no need for a rate hike at this stage.”