Cost-of-living concerns offset 'relatively well received' budget: Westpac survey
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The news: Westpac's monthly consumer sentiment survey found the public's response to last week's federal budget was the least negative it has seen in fourteen years, though the announcement failed to offset cost-of-living and inflation concerns within the Australian public.
The numbers: The Westpac Melbourne Institute Sentiment Index — a monthly survey that gathers the opinions of around 1,200 Australian adults — fell 0.3% to 82.2 in May, from 82.4 in April.
The index is expressed as a single number, with 100 serving as the neutral baseline. A reading below 100 indicates that pessimistic consumers outnumber optimistic ones, suggesting decreased consumer confidence and a potential decline in consumer spending.
Sentiment amongst those surveyed pre-budget showed an index read of 86.8, up 5.3% compared to April. Sentiment amongst those surveyed after the announcement came in at 76.6, down 7% compared to April. That 11.8% deterioration compares to a 7.4% drop last year.
However, when asked about the budget's expected impact on family finances, those expecting to be worse off (21%) outnumbered those expecting to be better off (18%) by 3 percentage points, a far less negative outcome compared with a difference of around 20-25% for each budget since 2010.
The context: The index found that, with the exception of the big stimulus budgets of the Covid period, last week's response to the Albanese government's budget announcement was the least negative since 2010. It also appeared to ease inflation and rate rise concerns rather than add to them.
However, the survey found that renewed cost-of-living pressures and inflation concerns more than offset the "relatively well received" budget. Consumer sentiment remains "deeply pessimistic", and while expectations improved slightly in May, this was overshadowed by a further deterioration in current conditions and fears that persistently high inflation may require further interest rate rises.
Meanwhile, public responses to July's tax cuts point to continued spending restraint by consumers heading into the second half of the year.
Sentiment-wise, the survey found that the two big developments over the last month have been the higher-than-expected inflation outcome reported in late April, and the federal budget.
The source: Westpac Melbourne Institute Consumer Sentiment Index
