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Why the budget pain game is dangerous

Source: Westpac / Melbourne Institute

Source: Westpac / Melbourne Institute

The extreme divisiveness of Australian politics over the past four years is starting to extract an economic toll.

Consumer sentiment among Labor voters has crashed – and the polls are saying that Labor voters are now in the majority.

Treasurer Joe Hockey address a crowd at a Liberal luncheon held at the Westin in Sydney following last week's budget.

Treasurer Joe Hockey address a crowd at a Liberal luncheon held at the Westin in Sydney following last week's budget. Photo: James Alcock

It's the collapse in Labor supporters' confidence that is mainly responsible for the fall in overall consumer confidence, as reported by the Westpac/Melbourne Institute monthly survey with more Australians being pessimistic about their economic outlook than optimistic

But the post-budget fall of 6.8 per cent in the overall index to 92.9 – a near three-year low – masks the extent of the political division among Australian consumers.

By federal voting intention, Labor voters' consumer confidence fell by 18.3 per cent from last month to 74.9. Over the past year, it's dived 33.5 per cent.

Coalition voters' confidence eased a fractional 1.3 per cent to 111.6, but their confidence is still up by 21.9 per cent on this time last year and optimists outnumber pessimists.

Of the various demographic subsets of the survey, the Labor voters record by far the most pessimistic score.

It is a large part of the population to be turned negative by the political message coming out of Canberra.

By gender, women took the budget harder than men.

Female consumer sentiment fell 13.6 per cent to 87.9 while males were effectively steady on 98.2. Presumably, female Labor voters are the most depressed people in the land.

The government's forecasts for the new financial year depend heavily on a rise in consumer spending.

The message of "you will suffer and be worse off" does nothing to support consumer spending and confidence.

With Joe Hockey already promising Australians lower economic growth and rising unemployment in the new financial year, it's become a dangerous message in the year ahead.

Michael Pascoe is a BusinessDay contributing editor.

Follow us on Twitter @BusinessDay

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