Consumer unrest is mounting in the wake of the federal government’s plan to introduce a carbon tax and continuing uncertainty surrounding the economy and interest rates. And on top of it all, a slump in new home construction is causing the housing industry to get the jitters.
The latest consumer sentiment index from the Westpac-Melbourne Institute dropped by 2.4% in March to its lowest level since July last year. Consumers were most concerned about “budget and taxation”, with 42.2% of respondents recalling these issues – a large number compared to the normal 20%.
In a report published on ninemsn, Westpac’s chief economist Bill Evans said while there was “no specific evidence”, it was likely that this result was due to the government’s carbon price announcement. While Treasurer Wayne Swan blamed the opposition’s “scare campaign” surrounding the proposed tax.
Then of course there’s the unprecedented spate of natural disasters which took a noticeable toll on the property market in January, with the number of home loans granted falling by 4.5% nationally and a monumental 16.4% for the month in Queensland.
According to the Housing Industry Association, new home construction loans were also down significantly – dropping by 9.4%, while new home loans declined by 13.5%. Both of these figures represent the lowest level since December 2008.
HIA chief economist Harley Dale said, “The long term trend decline in new home building in Australia is an appalling blight on the housing affordability landscape.”
Meanwhile, the Reserve Bank continues to sing the same familiar tune, warning that caution is needed when it comes to maintaining the economy’s stability and that conservative saving rather than spending is the best approach Aussie consumers can take right now.
Central bank assistant governor Philip Lowe told an Australian Industry Group forum on Wednesday, “At times when there is a lot of spare capacity, all sectors can grow quite quickly without the overall economy butting up against capacity constraints. But this is not the situation we currently find ourselves in.”
In other words, while things are panning out just the way the RBA would like at the present time, if consumer sentiment begins to once again pick up and cause a surge in spending, they might be forced to pull the interest rate lever to maintain the current delicate balance.
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