Australia: Budget well received but sentiment drifts lower - Westpac

Bill Evans, Research Analyst at Westpac, suggests that despite what appears to have been a well-received Federal Budget, Australia’s consumer sentiment has continued to drift lower.

Key Quotes

“The survey detail points to a positive boost from policy measures, which included personal income tax cuts, being more than offset by weakening current assessments of family finances”.”

“The survey was conducted over the period May 7 to 12. Sentiment over the course of the week showed a clear Budget boost. About half of all responses were collected before the 2018-19 Federal Budget was released on May 8 – the Index for this sub-sample printed at 99.9 (down by 2.4% on April). The index for the sample collected ‘post Budget’ printed at a notably firmer 104.8. The 4.9% lift between pre and post Budget reads is the most positive turnaround since we began tracking sub-samples in 2011.”

“Consumers continue to face significant headwinds from weak income growth.”

“The Reserve Bank Board next meets on June 5. The minutes of the May Board meeting which were released on May 15 indicate that the Board feels no urgency to move on rates. Indeed the Board implies that there should be no ‘embarrassment’ in holding rates steady in a world where rates are being increased in other countries as it has become a “source of stability and confidence”.”

“We expect that the conditions required to justify an interest rate increase are a long way off. Westpac continues to expect that the cash rate will remain on hold for the remainder of 2018 and 2019.”