Political instability and increased mortgage rates have shaken the consumer confidence, reads Westpac’s consumer sentiment report published today, i.e. 12 September 2018.
The Westpac-Melbourne Institute consumer sentiment index declined 3% to 100.5 in September 2018 from 103.6 last month. The index floating just above the 100 level represents the weakest sentiment reading since November 2017.
Consumer sentiment amongst households with a mortgage has recorded a drastic decline of 5.6%. This comes after three of the four major banks recently lifted their standard variable mortgage rates by 14-16bps with two of these hikes announced during the survey week.
Although all index components recorded a downturn in September 2018, ‘economic outlook of next 5 years registered the biggest decline of 5.8% to 95.2. The ‘time to buy a dwelling’ index also fell 4.8%, reflecting the rise in mortgage rates. Beside mortgage interest rates hike, household budgets have been under the persistent pressure from slow growth in wages, declining house prices in Sydney and Melbourne and the rising cost of petrol.
Following the leadership change in August, the survey has seen divergent sentiment response among voters’ group. Those identifying as Coalition voters reported a 6.4% fall, ALP voters recorded a 4% rise and those without a stated preference reported a 6.6% drop in sentiment.
The bright spot in the September survey was a notable improvement in unemployment expectation across all the major states. As the Westpac Melbourne Institute Unemployment Expectations Index fell 6.6% in September to be 9.6% lower than a year ago. The data also revealed that consumers have gained confidence in the labor market on the back of significant improvement coming in the mining states.
However, in response to question on ‘wisest place for savings’, 64% of consumers favor safe options of bank deposits, superannuation or debt repayments. While just 10% favored real estate and 8% nominated shares.
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