License article

Consumer sentiment inches higher as budget continues to weigh

Consumer sentiment has risen marginally in June, picking up off the three-year low reached in May in the wake of the federal budget.

The Westpac-Melbourne Institute Consumer Sentiment Index gained 0.2 per cent to 93.2, after falling 6.8 per cent in May.

Consumer sentiment is still down 8.8 per cent over the past 12 months.

The doom and gloom surround the Coalition government's first federal budget is still weighing heavily on consumers' minds, with sentiment surrounding family finances versus a year ago down 5.4 per cent from last month. However, households remain optimistic about the next 12 months with a 5 per cent improvement in sentiment surrounding finances in the next year.

''The index is still in firmly pessimistic territory however, down 6.6 per cent from its pre-Budget level in April and 15.6 per cent below its post-election high in November last year," Westpac senior economist Matthew Hassan said.


Following last year's budget, there was a similar plunge in the consumer sentiment index, which fell 7 per cent in May. But, this was followed by a 4.7 per cent recovery in June.

''"The dominance of Budget concerns was apparent in responses to additional questions surveyed this month on news recall. A very high 74 per cent of respondents recalled news on 'Budget and taxation' with a wide majority viewing the news as unfavourable,'' Mr Hassan said.

''That is the highest level of recall for this topic since we began running the survey in the mid-1970s, surpassing those seen during the GST introduction in 2000, the mining tax announcement in 2010 and the Tax Summit in 1985.''

Local shares and the Australian dollar were little moved after the release.

Also on Wednesday morning, the weekly ANZ-Roy Morgan Consumer Confidence index was unchanged and is down 11 per cent since the end of April, when certain measures from the federal budget began to be leaked.

''The pace of recovery and the level that confidence eventually settles at will be important factors in determining the likely impact on consumer spending,'' ANZ senior economist Justin Fabo said.

''At this stage, ANZ's bottom line for the household consumption outlook remains that consumer spending will improve this year, although the confidence effects from the Budget may weigh on consumer spending in the near term and impact on the speed of that recovery,'' Mr Fabo said.