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Carbon pricing causes a slip in consumer confidence

Although Julia Gillard and the Labour government are determined to continue the carbon pricing debate, insisting that such a move is required to combat climate change, they’re failing to win support from the vast majority of Australians who simply do not want to pay yet another tax.

The prospect of the tax being introduced as scheduled in July 2012 has consumers spooked, with genuine concerns that Gillard’s proposal will significantly increase the already rising cost of living.

In a Sydney Morning Herald article, results from the Westpac-Melbourne Institute sentiment index revealed that the carbon tax, along with rising interest rates and utility prices, were undermining consumer confidence.

The index fell recently, sitting at its lowest level in two years – back to the levels when the global financial crisis had a death grip on the economy. Additionally, confidence surrounding personal family finances has slumped lower now than during the crisis itself.

Of those surveyed, 44 per cent said the news they remembered hearing most during the past month was regarding “budget and taxation”, with almost half this number mentioning interest rates as top of mind.

Westpac economist Matthew Hassan says, ”It is unusual for tax to register as so important. We have only ever had recall that big when there are major changes afoot – during the introduction of the goods and services tax in 2000, and during the mining tax debate in 2010.

”In terms of the perceptions the tax is clearly negative. It comes in at an index level 61 where 100 is neutral – it is not as negative as were perceptions about the mining tax or the GST, but it is clearly negative.”

On a brighter note, past experience with the introduction of the much maligned GST in 2000 suggests that as the complexities of the carbon tax become clearer and its introduction approaches, confidence will rebound.

At the moment though, many Australians are wondering just how much more they’ll be forced to shell out in the coming years at the supermarket checkout, the petrol pump and for necessities such as electricity and water bills.

This is evident in the results of a Battle for the Wallet report from TNS research, which found that two-thirds of us believe the cost of living to be substantially higher than it was 12 months ago, with only one third saying they’d received a pay rise in the past year.

With the Reserve Bank hinting at a further rate rise in the future to contain inflation, I would expect that consumerism will continue to lose favour with Aussies as we place more emphasis on getting our finances in order and clearing up any unnecessary debt, as well as saving and paying our mortgages out sooner than necessary.

While uncertainty and lack of buyer activity is likely to see the property market continue to weaken for the remainder of the year, putting ourselves in a healthier financial position will help to underpin the broader economy and property market in years to come, with less Australians ending up struggling financially.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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