Consumer confidence has tumbled after the Reserve Bank cuts rates, according to the ABC.
The Conservative Party was hoping that our increasingly-woke RBA would take a “wait-and-see” approach after the 18 May federal election result, which positively surprised so many, including businesses, consumers and investors.
But alas, if the Reserve Bank had hoped to fire up the economic engine room of consumer spending with a rate cut [this] month, it will be sorely disappointed by the initial reaction.
Key points:
- Consumer sentiment fell into pessimism after the RBA cut, reflecting worries about the economy
- Optimism rose among property investors, while renters became more pessimistic in June
- The survey points to consumers preferring to save than spend in the current climate
The 0.25-percentage-point cut sent consumer sentiment tumbling from net optimism to pessimism, according to the latest Westpac-Melbourne Institute survey.
“Responses over the survey week show a marked drop-off after the Reserve Bank’s official rate cut,” Westpac’s Matthew Hassan said.
With 100 index points representing the breakeven point between optimism and pessimism, responses collected before the June 4 decision had a combined index read of 106.8.
“Those collected after had a combined read of 95.5, with daily results showing a further softening after the weak GDP report,” Mr Hassan said.
“This is a disappointing result given the cut in official interest rates this month and suggests deepening concerns about the economy have outweighed the initial boost from lower rates.”
The March quarter national accounts showed GDP growth had slowed to just 1.8 per cent over the year, the weakest result in the decade since the GFC.
Mr Hassan said the interpretation was supported by studying the various sub-components of the index.
The biggest decline in the index was the expectations of the economy in the next 12 months, while personal finances in the next 12 months jumped.
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