Scott Morrison’s third federal budget is the best received in years, but most consumers do not think it will leave them better off financially.
The findings of Westpac’s consumer sentiment survey back up political polls that have generally shown the budget to be well received.
Westpac’s report judged the reception of the budget by looking at responses to its survey before Tuesday night and responses from those surveyed from Wednesday onwards.
“About half of all responses were collected before the 2018-19 federal budget was released on May 8 — the index for this sub-sample printed at 99.9 (down by 2.4 per cent on April),” said the bank’s chief economist Bill Evans.
“The index for the sample collected post-budget printed at a notably firmer 104.8.
“The 4.9 per cent lift between pre and post-budget reads is the most positive turnaround since we began tracking sub-samples in 2011.”
However, the rise in confidence did not totally correspond with how people thought the budget would affect them personally.
When asked what impact people thought the budget would have on their family finances over the next year, just over 10 per cent expected an improvement, 19 per cent a deterioration and 58 per cent anticipated no change.
“While the overall balance is negative (the net improve/worsen reading of –10 per cent for those with a view) it is much less negative than last year (a net –29 per cent) and the best response we have seen since we began running this question in 2010,” Mr Evans observed.
“The long time frame on the budget’s centrepiece — the seven–year personal income tax plan — and the lump sum refund approach to near term tax relief may also have dampened responses.
“The planned reductions in tax will not impact family finances until beyond the next tax year (including the refunds).”
Rising petrol prices, falling home values dent confidence
Overall, consumer confidence declined from 102.4 in April to 101.8 in May — a reading that shows there are still more optimists than pessimists, but continuing a recent downward trend this year.
Consumer confidence has fallen for the past seven months after having recovered prior to that.
Expectations about the economy for the next 12 months remain positive, but expectations for family finances were flat.
Moreover, family finances over the past year have continued to deteriorate, dropping 6.5 per cent over the past month to 83 — below long-term averages and the lowest reading since September last year.
“Consumers continue to face significant headwinds from weak income growth,” Mr Evans said, ahead of ABS wage growth data due out today.
“Other concerns would be reports of falling house prices and rising petrol prices.”
Petrol prices have risen more than 8 per cent over the past two months as oil prices have spiked.
House prices have continued to fall in Sydney and weaken in most other cities, leading to a six-month low in “time to buy a dwelling — at 101.1 it is well off average levels around 120, but still 10 per cent higher than the most recent trough in mid-2017.
House prices expectations remain above average levels, although they are weaker in New South Wales.
One stabilising factor for the housing market looks set to be steady interest rates at record lows.
“We expect that the conditions required to justify an interest rate increase are a long way off,” Mr Evans predicted.
“Westpac continues to expect that the cash rate will remain on hold for the remainder of 2018 and 2019.”