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Consumer Sentiment Drops

Australians are increasingly concerned about the state of the national economy, with two recent surveys highlighting decreased consumer sentiment. While there is still a lot to be optimistic about, the latest Westpac-Melbourne Institute survey showed decreased confidence at the start of June and the ANZ-Roy Morgan Consumer Confidence Index was flat after recent advances. A number of factors are responsible for the increasing pessimism felt in the community, including rising bank interest rates, higher energy costs, and weaker household incomes.

The Westpac-MI survey records consumer sentiment across a wide range of subjects, including family finances and wider economic conditions. Overall consumer sentiment was down 1.8 percent for the month, with the index dropping 5.8 percent for the year to reach a level 5.3 points below average. Economic conditions over the next five years were down 8.3 percent for the month and 6.5 percent for the year, with economic conditions for the next 12 months down 4.8 percent for the month and 6.7 percent for the year. The survey also shows increased pressure on family finances, which this component detail down 1.5 percent for the month and 9.9 percent for the year.

 According to the Westpac-MI report: "The index is now back in firmly pessimistic territory with the June reading the weakest since the RBA’s 2016 rate cuts. Although confidence is not overly weak it has shown a clear downtrend since mid-2016 ... The drop in sentiment can be widely attributed to continued weakness in household incomes, which have barely outpaced inflation over the last four quarters.  Other factors linked to the drop in sentiment including weak economic growth figures and rising household costs... Ahead of the release, many commentators feared the economy may have contracted in the quarter. Recent increases in mortgage interest rates and electricity costs have likely added to pressures."

Australia's gross domestic product slowed to 0.3 percent in the March quarter according to data released on June 7, taking annual growth to just 1.7 percent. This is the weakest pace of growth since the global financial crisis almost 10 years ago. Concerns about unemployment were also prevalent in the survey, with 3.5 percent more consumers expecting unemployment to rise over the next year. While this is still a clear improvement on historical figures, it does highlight a growing lack of job security on a short-term basis.

The latest ANZ-Roy Morgan Consumer Confidence report was flat at 112.9 for the week ending June 11, following three consecutive weeks of rises. According to ANZ's head of Australian economics David Plank, consumer confidence stalled on the back of weak first quarter growth figures, with expectations of current economic conditions down 5.2 percent. However, despite the future economic conditions indicator sliding to its lowest level since September 2015, consumers were still optimistic about their personal finances, with ANZ's reading jumping 9.4 percent to its highest level in 14 weeks.

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