Thursday, July 14, 2011

We're confident. Not.

Ahead of the carbon tax...

Tony Abbott has copped blame from the government for a new dive in consumer confidence which has pushed it to depths not seen since the global financial crisis.

The Westpac Melbourne Institute index dived 8 per cent in the survey conducted just ahead of the weekend carbon tax announcement, one of the biggest monthly slides on record.

Pessimists now outnumber optimists 7 per cent; the widest gap in 26 months.

“There’s no doubt that Mr Abbott has been running this outrageous scare campaign and there's certainly no doubt that it is having some impact,” said Treasurer Wayne Swan when asked to explain the collapse. “The opposition has been talking down the Australian economy and they've been doing it for months.”

The survey shows confidence among Coalition voters at an unusual low of 79 points, meaning pessimists outweigh optimists 21 per cent. Confidence among Laobr voters slipped 5 per cent but they remained on balance positive with optimists outweighing pessimists 14 per cent.

“The bottom line is a dramatic plunge,” said CommSec economist Craig James. “Just twelve months ago consumer spirits were holding near levels that would be considered euphoric.”

“Consumers are feeling fragile. Another rate hike could send people over the edge. Rates, rising living costs, falling share prices, global growth concerns and the added concern of a carbon tax have got many people saying, enough is enough.”

Westpac chief economist Bill Evans was perplexed by the severity of the slide...

“The only other time in recent history when the index has been sustained around the current level was during the period following the introduction of the goods and services tax which also coincided with the bursting of the dot com bubble in 2000,” he said. “Before that we have to go back to the deep recession of the early 1990s.”

Mr Evans said uncertainty about the introduction of a price on carbon was undermining confidence along with the European financial crisis and the lingering impact of rate hikes.

Mr Swan said uncertainty about events in Europe would have weighed on consumers as well as sombre news from the United States. “But I also think for the sake of Australian business, both small and large, Mr Abbott needs to stop talking down the Australian economy and stop scaring Australian consumers,” he said.

Mr Abbott said the carbon tax itself was sapping confidence and the prime minister should call an election.

Asked to describe family finances now versus a year ago pessimists outnumbered optimists 26 per cent. Asked about finances in the twelve months ahead time pessimists prevailed 8 per cent. Only when asked whether now was a good time to buy a major household item did optimists prevail, outnumbering pessimists a 25 per cent.

Separate Treasury figures released yesterday showed wealth held as property, shares and related assets little changed at record highs. On average each Australian family owned assets worth $759,300.

Published in today's SMH and Age

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