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Consumers grumpy about everything


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Australians have become such a grumpy bunch that even record low interest rates have lost their lustre.

And there’s no real reason to fear rates are about to take off.

The “most prudent course” is likely to be a period of stability in interest rates, Reserve Bank governor Glenn Stevens has said a number of times in recent months.

The cash rate was cut to 2.5 per cent in August 2013.

Pricing on financial markets suggests a rate rise could be 12 months away, while economists believe a hike might be as far away as late 2015.

It could mean the cash rate remains steady for longer than the previous unmatched period of stability – from December 1994 to July 1996.

The cash rate then was a relatively hefty 7.5 per cent, which resulted in variable mortgage rates close to 10 per cent.

Now that would have been something to gripe about.

The latest Westpac-Melbourne Institute consumer confidence report includes what it calls its “news heard” indices – political and economic news remembered by respondents in the past three months and whether it was viewed favourably or unfavourably.

News on interest rates scored an index of 71.2, below the 100 mark that separates perceived positive news from bad news.

A year ago, this index stood at 109.1, when people believed the central bank would keep cutting rates forever.

With neighbouring New Zealand already into its third interest rate rise this year, our views on rates will probably sour further.

Yet, the Westpac survey shows that compared with other categories, thoughts on interest rates are relatively buoyant – employment was at 30.6 points and inflation at 21.4.

Consumer confidence overall rose a meagre 0.2 per cent in June, a disappointment after its hefty post-budget drop in May.

Confidence is still down 6.6 per cent from its pre-budget level in April, and a whopping 15.6 per cent below its post-election high in November.

In May 2013, confidence dropped seven per cent after Labor’s last budget, but then regained 4.7 per cent the following month.

Westpac senior economist Matthew Hassan says the response to a budget can be an overreaction that reverses in following months.

In 2013, the rebound was assisted by interest rate cuts, which clearly won’t be the case this time around.

On the “news heard” scale, budget and taxation was remembered by 73.8 per cent of respondents, the highest level since the survey began in the mid-1970s.

It was even higher than when the GST was introduced in 2000.

Consumers were unimpressed by the budget and taxation news with an index 45. Politics scored 35.5 points.

The rest of the report card was far from glowing.

The survey’s sub-index tracking expectations for family finances in the next 12 months managed a five per cent rise in May.

But this was after a 23 per cent slump in May and the June reading is still the second lowest since the early 1990s recession.

The reality that the economy is growing at its fastest annual pace in about two years appears to have been ignored.

While this would seem a diabolical outcome for a federal government struggling to sell its first budget, and possibly retailers if such gloom translates into subdued spending, there are hints of hope for them.

The sub-index for expectations for economic conditions in the next five years rose a further 2.3 per cent in June after a surprisingly strong 11 per cent rise in May.

Hassan interpreted this as consumers viewing the budget as a positive for the medium term, a point the government makes repeatedly.

The index for “whether now is a good time to buy a major item” has also remained resilient through the budget turmoil, rising one per cent in June after a 2.3 per cent gain in May.

Treasurer Joe Hockey is adamant he is doing the right thing for the economy with his first budget and the fall in confidence is “entirely predictable”.

Over time, the government would deliver on a stronger economy, barring exceptional circumstances.

Things are going to get better, he predicts.

We can only hope he’s right.

Colin Brindsen is AAP’s economics correspondent

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