Oz consumer sentiment plunges

Not a pretty picture.  Even among L/NP Coalition voters, whose confidence jumped after the election results, the boost to confidence has waned.

The fall in sentiment this month is troubling as it comes against what should have been a supportive backdrop for confidence. The last month has seen a further 25bp interest rate cut from the RBA, the Federal government’s tax package pass through Parliament, more signs that the Sydney and Melbourne housing markets are stabilising and even some more improvement in the US-China trade dispute. Despite these positives, Australian consumer confidence has fallen to a two year low. 

The main driver continues to be deepening concerns about the outlook for the Australian economy and prospects for family finances. The index components show the biggest decline in the sub-index tracking expectations for the ‘economy, next 12 months’ which slumped 12.3% to be down 16.4% since May to its lowest level in four years. Longer term expectations for the economy were also pared back sharply, the ‘economy, next 5 years’ sub-index falling 6.7%.

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Interest rates are so low that rate cuts are no longer very stimulatory.  However, the L/NP right-wing coalition government, wedded to the Chicago school ideology on taxes and the deficit, refuses to take any fiscal action which will stimulate growth—except to cut taxes on the rich.  (Do these right-wing parties learn nothing from the experiences of right-wingery in other countries?)  The coal price is plummeting because China is slowing, plus world utilities are switching away from coal.  The iron ore price is soaring because of the collapse of a tailings dam in Brazil.  But this will surely not last—unless we get a runaway world economic boom.  Which we won't.

In Australia, there is a compulsory contribution to your "super" (retirement) fund, taken from your salary each month, and invested in the fund of your choice.  This is set at 9% of wages/salaries, and this amount is included in the calculation of personal savings.  The published savings ratio is way below 9%, which means that the savings ratio of take-home pay is negative.  This means that consumers are running down savings or running up debt.  Neither is sustainable, and frankly, with collapsing consumer sentiment, neither will continue.  Not good.