Westpac Banking Corp (ASX: WBC) has announced consumer sentiment has fallen 4.8% this month, with the Federal Budget having nearly no impact on consumer confidence.
The bank’s report comes on a day in the red for the Westpac share price, which is currently down 1.47%, trading at $25.09.
While a fall in consumer sentiment rarely brings anything good with it, Westpac’s chief economist Bill Evans told Australians not to worry, saying:
While a 4.8% fall is always going to attract attention, we should put this result in perspective. It is still the second highest print for the Index [of Consumer Sentiment] since April 2010 and does follow an 11% rise in the index over the previous three months.
Let’s take a closer look at the latest results of the Westpac-Melbourne Institute Index of Consumer Sentiment.
Evans said there was no evidence of a consumer reaction to the Budget, although political loyalties did affect their confidence levels.
“No doubt the Budget achieved a positive political objective with a 1% dip in confidence amongst Coalition voters contrasting to an 8.1% fall in confidence amongst ALP supporters,” he said.
The Federal Budget dropped halfway through Westpac’s surveying period.
According to the bank, 1 in 5 Australians believes they will be better off due to the Budget’s measures. That’s in contrast to 2020 when 1 in 4 consumers thought they’d be better off as a result of the Budget.
This undoubtedly reflects the different aims of these recent Budgets which have been focussed on addressing the economic challenges of the pandemic. Previous Budgets since 2010 have been framed around ensuring a path back to Budget surplus.
The cost of new initiatives in this year’s Budget – 4.1% of GDP – and in 2020 – 5.5% of GDP is in stark contrast to, say, the 0.5% of GDP in 2019 when the government was balancing the competing demands of an imminent election and the need to reach Budget balance.
The report noted that the housing market might be impacted by consumer sentiment. Since November, all jurisdictions have seen a 15% to 40% decline in the ‘time to buy a dwelling’ index.
Meanwhile, employees in the arts industry have topped the list as the most sceptical Australians, with a 33% fall in consumer confidence. Evans said this was perhaps spurred by a lack of protective measures in the Budget.
Westpac share price snapshot
Despite a poor day’s trade, the Westpac share price is having a great year on the ASX. Currently, the Westpac share price is up 27% year to date. It has also gained 64% since this time last year.