Originally published by AMP Capital
- Consumer confidence fell 3% in September and is now back to around its long term average according to the Westpac/MI consumer survey.
- This followed a fall in business confidence in August according to the NAB business survey.
While other factors may also be impacting, including ongoing news of falling home prices, its likely that political turbulence in Canberra has been a driver of the fall in confidence, just as the election of the LNP Coalition in 2013 with the hope of political stability after the Rudd/Gillard/Rudd years provided a boost to confidence. If sustained this will be a drag on consumer spending and supports the case that households won’t be comfortable continuing to run down their saving rate.
The September consumer survey also showed that households remain cautious about shares, superannuation and real estate as the wisest place for savings but continue to like paying off debt and bank deposits (despite low interest rates). All of which is consistent with households remaining cautious in their investments, which is a positive from a contrarian perspective although (apart from real estate) this has been the case ever since the GFC.
Implications
The soft readings on consumer and business confidence are consistent with our view that the RBA will be on hold for a long time yet and that its premature to rule out the next move in rates as being down.