Low wage growth dampens consumer confidence: ANZ

While overall consumer confidence grew modestly in the week ending 21 May, Australians believe financial conditions are worse than this time last year. 

According to the most recent ANZ-Roy Morgan consumer confidence analysis, overall confidence rose 1.0 per cent to 110.5 points. This number sits above the 100-point marker which separates optimism from pessimism, but below the long-term average of 112.9.

However, household views about consumer finances a year ago dropped by 0.8 per cent, pulling the index down to 100 points — its lowest value since August 2014.

ANZ’s head of Australian economics, David Plank, said the decrease in confidence around current financial conditions may reflect concerns around persistently low wage growth. 

“We will be closely watching what happens to the household saving rate in the Q1 GDP data due to be published in early June. We expect it will rise in response to concerns about weak wages growth,” he said.

Following the release of the federal budget, households’ expectations towards current and future economic conditions took a 4.9 and 5.5 per cent dive, respectively. However, in the last week both have recovered 0.9 and 0.6 per cent, respectively.

Looking to future financial conditions, confidence rose by 1.5 per cent.

“The modest rise in confidence is quite encouraging, especially given the negative news flow surrounding President Trump and the fall in domestic equity markets,” Mr Plank said.

“It appears confidence was buoyed by the second consecutive solid jobs report out last week, which included a drop in the unemployment rate.”

Looking forward, ANZ expects labour market conditions to continue improving reflecting a period of ‘catch up’ between official and survey-based measures of employment.

Mr Plank believes this should broadly support confidence, although a rapid increase is unlikely, given ongoing low wage growth.

“Additionally, in the near term, confidence remains at risk to any changes in the global political environment,” he added.

[Related: Consumer confidence makes solid recovery]

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Lucy Dean

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