(Australian Associated Press)
Consumer sentiment remains steady in March as concerns about economic conditions, budget and tax have eased, according to Westpac.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose 0.1 per cent to 99.7 points in March, from 99.6 points in February, but remains below the 100 point level at which optimists outnumber pessimists.
Westpac chief economist Bill Evans said the index appeared to be stabilising around the point where optimists and pessimists are around equal in number.
“The encouraging 2.3 per cent lift we saw in the index in February has been sustained in March,” he said.
Still, the survey shows a notable worsening in consumers’ current family finances with the relevant index dropping 5.3 per cent.
“This component is now at its lowest level since June 2014 when respondents were shaken by the May Budget announcement.
“However, on that occasion the overall index was much lower than we see today, indicating that, currently, respondents are particularly concerned about their own finances,” Mr Evans said on Wednesday.
The unemployment subindex fell 3.1 per cent in March – pushing it back to around December levels – meaning more consumers expect unemployment to fall in the year ahead.
“Our take on the index is that respondents’ assessments of the unemployment outlook have stabilised around a level which is consistent with spare capacity consistently available in the labour market with little prospect of that spare capacity actually clearing,” Mr Evans said.
There also was a notable shift in savings choices with the preference of paying down debt jumping to 25.7 per cent, from 20.5 per cent.
And, the proportion of people favouring real estate dropped to just 11.6 per cent, the lowest level since Westpac started asking the question in 1974, indicating a clear aversion to risk.
Westpac expects the Reserve Bank of Australia to keep rates on hold for the remainder of 2017 and next year.
“We expect that growth in the economy will slow in 2018 as the residential construction boom unwinds,” Mr Evans said, noting that households are concerned about their finances due primarily to weak income growth.
“This concern is unlikely to fade in 2018 appropriately constraining household spending and discouraging investment. That is no environment for higher rates,” he said.