During most of the period between 2014 and 2018, there has been a divergence between consumer sentiment and business confidence in Australia. July’s consumer survey was thought to have marked the beginning of a convergence of the two sectors. It now appears the two sectors have converged but not in the manner expected. Both consumer and business sentiment indices have moved into line with each at just below their long-term respective averages.
According to the latest Westpac-Melbourne Institute survey conducted early in September, households’ levels of optimism slipped as the Consumer Sentiment Index fell back from August’s reading of 103.6 to 100.5. Any reading above 100 indicates the number of consumers who are optimistic is greater than the number of consumers who are pessimistic. The long-term average reading is just over 101.
Westpac’s chief economist Bill Evans said the combination of higher mortgage rates, political instability at the Federal level and household budget stresses were partially offset by favourable economic growth news and confidence. “It is also encouraging that respondents have boosted their confidence in the labour market with a significant improvement coming in the mining states.”