Australia slowdown, housing crash hit consumer confidence in March, lowest in over a year

SYDNEY: A gauge of Australian consumer confidence slumped in March to its lowest level in over a year as gloomy media coverage of disappointing economic news took a heavy toll on the national mood.

The survey showed the Melbourne Institute and Westpac Bank index of consumer sentiment fell 4.8 per cent in March, unwinding a 4.3 per cent jump in February.

The index, compiled from a survey of 1,200 people, was down 4 per cent from a year earlier at 98.8, meaning pessimists now outnumbered optimists.

This sharply contrasted with the ‘cautiously optimistic’ consumer mood through most of 2018.

One reason for the gloom was a sharp slowdown in the A$1.9 trillion economy in the secondhalf of last year, in part due to a steeper-than-expected housing downturn.

The dour survey will be a setback for the central bank which last month tempered expectations for a future rate hike, saying the risks for a move on either side are now evenly balanced.

Despite the Reserve Bank of Australia’s (RBA) doggedly neutral stance, many investors are now expecting a rate cut this year.

“We are mindful it may not take much additional weakness to trigger an easing from the RBA,” ANZ’s head of Australian economics David Plank said in a note in which he removed a hike from the RBA’s long-term rate outlook.

“Should it look as if the unemployment rate is trending higher, we think the RBA will act quite quickly,” he said.

ANZ sees the possibility of a policy easing as early as May although it’s base case scenario is for rates to stay on hold through 2020.

The RBA has repeatedly said a strong labour market would boost household incomes and economywide spending, although some leading indicators of labour demand are now pointing to a bearish picture.

In the consumer sentiment report, respondents appeared to be reacting to data showing the economy slowed sharply in the December quarter of last year, which many in the media referred to as a “per capita recession”.

“The survey detail indicates that this had a significant negative impact on confidence,” said Westpac senior economist Matthew Hassan. “Responses over the survey week show a marked drop-off after the national accounts update.” — Reuters

A row of newly built apartment blocks is seen in the suburb of Epping, Sydney,Australia. One reason for the gloom was a sharp slowdown in the A$1.9 trillion economy in the second-half of last year, in part due to a steeper-than-expected housing downturn. — Reuters photo