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Consumers slightly more confident in June, survey shows

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Australians refuse to believe the economy is travelling well, despite successive rate cuts and upbeat commentary from the central bank, a private study has found.

The Westpac/Melbourne Institute Consumer Sentiment Index, released on Wednesday, showed a rise of only 0.3 per cent to 95.6 index points in June.

Westpac chief economist Bill Evans said the result was disappointing, considering another move by the Reserve Bank of Australia (RBA) to drop the cash rate 25 basis points at its June meeting.

“Sentiment has risen only 1.1 per cent from its April level and remains 1.7 per cent below the level recorded in October last year,” he said.

“This is despite an (overall) 125-basis point reduction in the cash rate that has brought the average standard variable mortgage rate down by nearly one per cent (since November).”

Mr Evans said people clearly were preoccupied with other factors, including the condition of the domestic economy and economic instability offshore.

Mr Evans said that new questions in the study – focusing on news items and how they were perceived – showed consumers were worried about the domestic and global economy.

“The results show negative news around the economy and international conditions dominated,” he said.

“By far the highest recall was on news about economic conditions (67.1 per cent of respondents) and international conditions (40.4 per cent).

Two of the study’s five sub-sectors showed improvement, with respondents feeling better about their family finances compared to a year ago and more confident in buying a major household item.

However, forward projections for family finances, and the economic outlook in the next 12 months were both weak, as were economic projections for the next five years.

Optimistic comments about the domestic economy seem to have left consumers unconvinced, according to JP Morgan economist Ben Jarman.

“Households clearly have registered the benefits of lower rates,” he said.

“Unfortunately, they are not listening to the RBA Governor’s speeches, and remain very worried about the future.”