My prediction a week ago that Scott Morrison's Budget was unlikely to be a election liability is not looking good. Wednesday's consumer sentiment result and other feedback suggests that the budget isn't helping, and might be doing harm. The fact that it was actually even-handed is being lost in the election ruckus.
People began being contacted for the May edition of the Westpac Melbourne Institute consumer sentiment survey on Monday, May 2, the day before Scott Morrison unveiled his first budget, and the Reserve Bank met and cut its cash rate. The survey of 1200 people was completed on Saturday, May 7, so both events are in the weave of the results.
Compared with April, sentiment improved by a solid 8.5 per cent, to 103.2 points, comfortably above the 100 point plimsoll line that divides a positive mood and a negative one. By way of comparison, the index sank from 99.7 points to 92.9 points in May 2014 after Joe Hockey's heavy-handed first budget.
Goldman Sachs points out, however, that the over three months, consumer sentiment is still sub-par, at an average 99.2 points. Westpac chief economist Bill Evans also believes that the dominant driver of the latest sentiment lift is the Reserve Bank rate cut.
The Coalition outlined changes to superannuation in its pre-election budget.
The impact of rate cuts declines as rates go lower, but they are always a sentiment mood-changer, and, in the May survey, the sentiment of people paying off mortgages improved by a remarkable 15 per cent. The last 4 rate cuts produced overall sentiment gains of from 3.5 per cent to 8.5 per cent, and the average bump was 6.6 per cent.
Those surveyed in May were also asked how they thought Morrison's budget would affect family finances over the next year. More thought the budget would hurt than thought the budget would help.
Budgets are expected to hurt sentiment, or course. Westpac began asking respondents what they thought budgets would do in 2010, and the answer has been negative every year. Joe Hockey's first budget produced a net negative response of 56 per cent on the family finances question. His second, friendlier, budget produced a net negative percentage of 22.5 per cent, and Scott Morrison's election-eve budget has a net negative percentage of 22.4 per cent: that is the second best rating since the question was asked.
Consumer confidence has also been much lower and much higher than it is in this election campaign. It was 79 points in July 2008, when the global crisis was heading towards its climax later that year. Its high was 123.9 points in May 2007, at the peak of the boom that seeded the financial crisis.
A mid-year election is also potentially less destabilising than one held later in the year, as this one could have been.
After unveiling better than expected sales numbers on Thursday, Myer's chief executive, Richard Umbers, said the election would, as usual, weigh on consumer sentiment. He also noted that the election overlaps with important year-end sales. The most important retail trading period is the pre-Christmas and New Year one, however. An election at the end of the year could have more disruptive.
Even allowing for all that, however, the Coalition must be disappointed about the reaction to a budget that had to both exercise some discipline and assist the Coalition's re-election campaign.
Labor does appear to have made inroads with its post-budget attack, in particular its "tax cut for the rich" characterisation of the Coalition's commitment to end the 2 per cent temporary "deficit repair" tax levy next year, as it promised in 2014.
The Coalition is also not getting the response it sought for a crucial pillar of the budget and its growth and jobs election pitch – a lengthy programme of legislated business tax cuts.
Company tax cuts will deliver growth and jobs, but for voters at large so far, the they appear to matter less than personal tax cuts. Big business, meanwhile, sees execution risk in the planned 10-year rollout of the cuts, beginning with small companies, and concluding with the largest. "The question is whether they will ever be delivered," the influential Orica chairman and BHP director, Malcolm Broomhead, remarked this week..
Early voter goodwill towards Malcolm Turnbull's leadership has also faded in the private surveys.
In December, I wrote that after Malcolm Turnbull became Prime Minister in September Canberra simply dropped off the radar for focus groups that are regularly conducted by a firm that advises some of Australia's largest companies.
It was not that those surveyed reported that the leadership change had solved government-related concerns that they previously held. Rather, they just stopped mentioning Canberra as an issue, and focused instead on things that are closer to home.
The honeymoon spilled over into the new year, but the focus groups began to once again cite Canberra and the government as a concern about three months ago, as the government floated and then sank ideas for tax reform including a goods and services tax hike, and curbs on negative gearing. The most recent focus group was put together after the budget, and in it, the number of swinging voters characterising Malcolm Turnbull as someone who is mainly interested in the top end of town also rose.
There's not enough in all this to state that Malcolm Turnbull is in danger of leading the Coalition to an election loss in July. The budget doesn't appear to have been a mood-improver, however, and may have tightened the numbers. Businesses including those that see the focus group data are likely to be in strategic holding pattern until the election battle is decided.