The latest Westpac Melbourne Institute consumer sentiment survey finds an extraordinary 43 per cent of us believe our family finances have worsened over the past year, way in excess of the 19 per cent who believe they have got better.
But asked whether “now is a good time to buy a major household item” 50 per cent say it is; only 27 per cent disagree. Asked whether now is a good time to buy a car 44 per cent say yes and only 22 per cent no. Asked whether it’s a good time to buy a house 48 per cent say yes and 28 per cent no.
Westpac’s chief economist Bill Evans has an explanation for the paradox.
“When we ask whether now is a good time to buy, people say ‘yes’ because stuff is cheap on account of the high dollar. But that doesn’t mean they’ll do it.”
“We have found actual purchases to be much more closely related to how they feel about their finances, and people are worried"...
The latest retail figures show spending growing at a trend rate of just 0.1 per cent per month, much lower than the rate of inflation. Stores such as Dick Smith and JB Hi Fi whose prices have been held back by the high dollar, report disappointing sales.
Although wages are holding up and unemployment is fairly steady Dr Evans believes falling house and share market prices are making families nervous.
“If you have a lot of debt and your asset is performing well you will be confident, but if you’ve got high debt and your asset is under-performing, you’ll be worried about your finances and less prepared to spend, he says.
The consumer confidence index slid 7.7 per cent to 96.1 in this month’s survey, dipping below the neutral of 100 where optimists balance pessimists.
“The awkward thing for the Reserve Bank is it is now back below where it was before the Bank started cutting rates in November,” said Dr Evans. “Moves by the retail banks and global concerns have offset everything the Bank has done.”
“The weak jobs market is also biting, even though it is not yet showing up in the unemployment rate.”
“Last year was appalling for jobs - the first time since 1992 we failed to expand employment. The only reason unemployment didn’t rise was that men walked away; construction workers and manufacturing workers gave up rather than add to unemployment.”
The survey shows a sharp switch to caution in managing savings. Only 5 per cent of those surveyed now believe the share market is the wisest place for savings, down from 12 per cent a year ago. The proportion believing a bank is the safest place has climbed from 27 to 35 per cent.
In today's Sydney Morning Herald and Age
. We were feeling better, until Westpac whacked us
. No need for finance, we're waiting for a sign - business
. Consumer confidence by voting intention - I've made a graph