14 February 2019

Bob Cunneen, Senior Economist and Portfolio Specialist

Source:  NAB Business Survey and Westpac Melbourne Institute (WMI) Consumer Sentiment survey.

Confidence is a key indicator for economic growth. Consumer spending, housing construction and business investment can all depend upon confidence.

NAB’s Business Survey (blue line) shows that confidence has turned down over recent months. Business confidence has slipped below the past decade’s average. There has been broad based softness across industry sectors with the retail sector’s confidence being particularly weak. So the business sector is mildly cautious, perhaps worrying about a range of factors such as global trade tension, the China slowdown as well as the Australian consumer.

Australia’s consumer sentiment has also recently softened. While we do not know exactly why the Westpac Melbourne Institute (WMI) Consumer Sentiment survey (red line) is modest, there are some ‘usual suspects’. Consumers seem to be worried about falling house prices, high household debt and slow income growth.

These sedate results for both business and consumer confidence are not yet a major concern. These confidence measures are still at much healthier levels compared to the pessimism that prevailed during the Global Financial Crisis (GFC). However if Australia’s confidence measures dramatically decline from these current levels, the Reserve Bank of Australia would need to consider cutting interest rates.

Source : Nab assetmanagement February 2019 

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