Carbon tax fallout
IT’S not often that worries over interest rates are upstaged by another factor in consumers’ thinking, but the furious debate over a carbon price appears to be too much to bear.
While the nasty row over pricing carbon has at times dropped to farcical levels as our politicians appear to say anything to win their side of the argument, it’s been enough for shoppers to drag out their worry beads.
The latest reading of consumer confidence released this week showed sentiment has dropped to its lowest level since June 2010.
Oddly enough, this was a time when consumers were fretting over another levy – the mining tax.
The announcement of a carbon tax comes hot on the heels of the flood levy, which looks set to pass in the Senate, although the government has repeatedly emphasised it will be no more than the price of a cup of coffee for many people who have to pay it. You can imagine coffee shop owners cringed every time that comparison was made.
One unintentional benefit from this war of words on what is still a hypothetical carbon tax – we have no detail other than its start date of July 1, 2012 – is it is keeping the Reserve Bank on the sidelines regarding interest rates.
Not whether there is a carbon price or not, but the fact that the consumers’ mood is souring.
The fall in confidence
COFFEE FIX: The government has repeatedly emphasised the carbon tax will cost no more than the price of a cup of coffee suggests that people won’t be rushing out to the shops and changing their behaviour from big savers to big spenders any time soon.
In its quarterly analysis on retailing, Deloitte Access Economics expects sales w i l l c o n t i n u e s l o w l y through the first half of 2011, although better news is likely in the second half of the year and beyond.
‘‘ One can’t ignore the recent surge in Australia’s income and we suspect that, over time, very low rates of unemployment should help to loosen the purse strings of consumers,’’ Deloitte Acc e s s p a r t n e r D a v i d Rumbens said.
His report showed that retailers have suffered their worst performance since the late 1980s during the past year.
The rapid turnaround in interest rates since hitting near record lows during the depths of the global financial crisis has been a jolt to c o n s u m e r s , b u t M r Rumbens also said the advent of the GFC itself has scared people into paying off their debts or building a nest egg.
So when their TV screens are full of red-faced politicians screaming blue murder over broken election promises, cost of living pressures and the need to t a ke a c t i o n o n c l i mate change, said purse strings may remain firmly tied.
And little wonder that the 2.4 per cent fall in the March Westpac-Melbourne Institute sentiment index this week featured a spike in news recalled on ‘‘ budget and taxation’’, outpacing recollections on interest rate news.
The news on ‘‘ budget and taxation’’ was also regarded less favourably than that on rates.