Commonwealth Bank of Australia economist Gareth Aird has asked, “Are we talking ourselves into a downturn?” and said that the Australian consumer needed a “circuit breaker”.
By Matthew Cranston
NAB Business conditions and confidence survey for February released on Tuesday 12 March showed that profitability had dipped and trading conditions had softened but that measure of employment was still well above average.
“Indicators of labour demand will be important in assessing if the labour market is at a turning point.” the NAB survey said. The NAB’s survey measure of employment is still well above average and implies ongoing employment growth of 19,000 per month.
However, the latest Westpac MI Surveys suggests that although unemployment expectations are back near their long-run average – rather than to outright weak levels – the jump still points to a material deterioration from the strong labour market conditions that prevailed throughout 2018.
Westpac senior economist Matthew Hassan said any optimism seen in February’s consumer confidence numbers had been “short-lived” and that there still appeared to be uncertainty around consumer confidence.
“The main development over the last month was the December quarter national accounts update that showed Australia’s economic growth slowing to a 1 per cent annual pace over the second half of 2018, widely described as a ‘per capita recession’ in media coverage. The survey detail indicates that this had a significant negative impact on confidence.”
ANZ economist David Plank allayed concerns on Wednesday by suggesting GDP numbers were not the best indicator for monetary policy and that the Reserve Bank of Australia would keep interest rates on hold this year.
“We expect the RBA to be on hold in 2019 and 2020. GDP has been a poor guide to RBA action. We see the unemployment rate tracking sideways. That, plus more stimulus in the Budget, will keep the RBA on hold.”
CommSec’s Craig James said the situation on consumer sentiment was a “case of being alert and not alarmed”.
But there are few positives. More homebuyers believe that now is a good time to look for a bargain and buy a home with the index that charts this response now at a 5-year high, up 30 per cent from the mid-2017 low. With house prices falling in Sydney by 10.4 per cent in the last year there have been concerns about the so-called wealth effect where falling house prices start to crimp spending.
The latest index however showed that consumer attitudes towards major household purchases had steadied with the “time to buy a major household item” sub-index down just 0.6 per cent.
First published at the Australian Financial Review – Wednesday 13 March 2019.