Australia's consumer confidence surprises on downside, yet stays above long-run average

The Australian consumer confidence surprised markets on the downside; however, it stayed well above the long-run average.

ANZ-Roy Morgan Australian Consumer Confidence fell a sharp 2.8 percent to 114.7 this week. This is a surprising result given that the RBA cut the cash rate to a historic low of 1.5 percent last Tuesday. Consumers' views of their current finances went down 2.8 percent; while, views on future finances slipped 2.4%.

Moreover, view of the 12 month economic outlook declined 8.6 percent. Further, on economic outlook in the next 5 years, the index dropped 1.0 percent. Consumers were considerably more pessimistic on the near-term economic outlook. Households’ views of the 12 month economic outlook dipped a sharp 8.5 percent. Views towards the economic outlook in the next 5 years also fell, but by a much more modest -0.8 percent.

Further, consumers’ views towards whether 'now is a good time to buy a major household item' remained largely unchanged.

"The weakness in confidence is more pronounced in the near term economic outlook – possibly reflecting some concerns over the health of the global economy. Indeed, our ANZ Uncertainty Index is at highest level since the euro area debt crisis in 2011," said Felicity Emmett, Head, Australian Economics, ANZ.

Though the failure of Australia’s big banks to pass on the rate cut in full could have been behind the slump, particularly the gauges measuring personal finances, it does not explain the sharp deterioration seen in near-term economic sentiment witnessed during the week.

Meanwhile, Emmett suggests that the survey’s measures on finances still remain 'relatively robust', implying household consumption levels will likely remain firm in the period ahead.