Lower consumer confidence puts pressure on RBA
(13 April 2012 – Australia) The Westpac Melbourne Institute has reported consumer confidence had fallen 1.6 percent to an eight-month low amid growing fears about job security and household finances, increasing pressure on the Reserve Bank of Australia (RBA) to cut interest rates next month.
In what economists dubbed a disturbing development, the survey also found 48.5 percent of households thought their financial position had become worse in the past year, while only 13.5 percent thought they were better off now.
Westpac chief economist Bill Evans said consumers had not been this despondent about changes in their financial position since July 2008, when many were gripped by fears of a global recession.
''The results of this survey should be sending a very clear message to the Reserve Bank that Australia needs lower interest rates,'' Evans said.
The pessimism is expected to weigh on consumer spending, and a senior banker at NAB warned that morale among some industries was so weak that companies were hoarding cash and considering holding back on investment plans.
NAB's executive in charge of business banking, Joseph Healy, said there was a growing risk that businesses outside the booming resources sector could ''sit on their hands'' and postpone investments as they waited for confidence to return.
Any such delays threatened to worsen the economy's productivity woes, because they would prevent businesses from making crucial adjustments, he said.
''My concern is that the decision by many businesses to hold back on investment and to sit on cash may have longer-term consequences to profitability, productivity and efficiency,'' Healy said. ''By choosing to sit on their cash rather than invest, business could inadvertently exacerbate the problems they are trying to wait out.''
Westpac chief economist Bill Evans said consumers had not been this despondent about changes in their financial position since July 2008, when many were gripped by fears of a global recession.
''The results of this survey should be sending a very clear message to the Reserve Bank that Australia needs lower interest rates,'' Evans said.
The pessimism is expected to weigh on consumer spending, and a senior banker at NAB warned that morale among some industries was so weak that companies were hoarding cash and considering holding back on investment plans.
NAB's executive in charge of business banking, Joseph Healy, said there was a growing risk that businesses outside the booming resources sector could ''sit on their hands'' and postpone investments as they waited for confidence to return.
Any such delays threatened to worsen the economy's productivity woes, because they would prevent businesses from making crucial adjustments, he said.
''My concern is that the decision by many businesses to hold back on investment and to sit on cash may have longer-term consequences to profitability, productivity and efficiency,'' Healy said. ''By choosing to sit on their cash rather than invest, business could inadvertently exacerbate the problems they are trying to wait out.''
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