Wage growth concerns drag confidence down

Simone Ziaziaris
(Australian Associated Press)

 

Consumer confidence has fallen to its lowest level since mid-2015 with households concerned about lacklustre wages growth and seemingly ever-rising energy costs.

The latest ANZ-Roy Morgan Consumer Confidence Index fell 2.2 per cent to 109.2 in the week to August 20, from a high of 118.4 only three weeks earlier.

ANZ head of Australian economics David Plank said that despite a solid labour report, four out of the five sub-indices posted declines with sentiment around personal finances particularly faltering.

Households’ views towards current financial conditions slipped 2.1 per cent last week, while views towards future financial conditions fell 5.3 per cent, more than reversing the prior week’s 1.9 per cent rise.

He said the current controversy surrounding dual-citizenship in Parliament may have also weighed on sentiment, especially on views about future economic conditions.

Consumers’ view towards current economic conditions dropped 1.5 per cent, the third straight weekly fall, while sentiment around future conditions fell a sharp 6.8 per cent.

Inflation expectations, however, edged higher, up 4.5 per cent on a four-week moving average basis, with the weekly value at 4.4 per cent.

Mr Plank said wages growth continues to weigh on consumers’ minds, following last week’s report which showed a disappointing decelerating in private-sector wages growth.

“Though the larger-than-usual minimum wage hike will boost reported wage growth in Q3 (the third quarter), we believe that any increase further out is only likely to be gradual, given the level of spare capacity in the labour market,” he said.

“Overall, despite a strong labour market and robust business conditions, we believe that any recovery in consumer confidence is likely to be capped until households experience a material acceleration in wage growth.”

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