Consumer confidence fall not as bad as feared: Westpac

Consumer confidence has suffered a blow from lengthening Covid lockdowns, albeit less than might have been feared.

Sydney’s Pitt Street mall deserted during lockdown. Picture: Gaye Gerard

Consumer confidence has suffered a blow from lengthening Covid lockdowns, albeit less than might have been feared given that the nation’s two largest cities are under stay-at-home orders and confidence among the vaccinated is rising.

The Westpac-Melbourne Institute Consumer Confidence index fell 4.4 per cent to an 11-month low of 104.1 points in August from July.

Sentiment remained in positive territory, even in parts of the country facing the biggest virus challenges.

Westpac senior economist Matthew Hassan described the fall as significant, but better than might have been expected given coronavirus developments.

At 104.1, the index is now at its lowest point in a year but still well above the deeply negative lows recorded during last year’s national lockdown.

“The virus situation locally is clearly troubling, but consumers appear reasonably confident that it will come back under control, and that once it does, the economy will see a return to robust growth,” Mr Hassan said.

The Reserve Bank of Australia has estimated that consumer spending falls 15 per cent in lockdowns.

It has forecast an economic contraction this quarter, albeit less than most economists expect.

The RBA also expects a rapid rebound to start in the December quarter assuming lockdowns start to end, and has said it will go ahead with a taper of its bond purchases next month.

“The apparent resilience of consumer sentiment will give some comfort to the RBA, suggesting the consumer and the wider economy remain well placed to snap back once virus restrictions ease,” Mr Hassan said.

“Westpac’s central case remains that widespread vaccination will see a reopening recovery underway by the November board meeting, meaning this will still be an appropriate time for the Reserve Bank to start scaling back its bond purchases.”

“We also remain comfortable with our view that the board will begin raising the cash rate in the March quarter of 2023.”

It came as the Australian share market hit an all-time record high of 7615.1 points, before closing up 0.3 per cent at a record daily close of 7584.3.

The share market has and risen 15 per cent year to date and 4.3 per cent in the past month.

Wespac’s Hassan added that the availability of effective Covid vaccines is a “key source of support for confidence”.

“Notably, sentiment is much stronger amongst those that have either been vaccinated or plan to get the jab,” he said.

The poll was based on responses from 1200 people and conducted from August 2-7.