Consumer confidence continues to wear low as it is affected by increasing fears of another interest rate hike and tightened household spending.
The Westpac-Melbourne Institute Index of Consumer Sentiment reported a 1.3 per cent fall in consumer sentiment to 103.9 in May from 105.3 in April – the lowest level since June 2010, a month which followed three consecutive rate hikes by the Reserve Bank in March, April and May.
‘‘This is a modest adjustment to the index but the result is still sending a subdued message about the state of the consumer today,’’ Bill Evans, Westpac chief economist, said.
Evans blames the Reserve Bank for suggesting in May a possibility of more interest rate rises, where the current interest rate has been held steady at 4.75 per cent since November.
Additionally, the survey was conducted after the announcement of the Federal Budget. Opinion polls and responses to a special question in this survey pointed to the Budget being poorly received with respect to respondents' assessments of their own finances.
“The special question in the Westpac Melbourne Institute survey showed that 36 per cent of respondents expected that the Budget would worsen their family finances over the next 12 months and only 7 per cent expected it would improve their finances,” Evans said.