Australian consumers are increasingly worried about their jobs and the economic outlook, with the growing gloom expected to hurt their spending decisions.
“The run of ‘bad news’ around the motor vehicle industry, other manufacturers and Qantas has clearly rattled consumers,” Westpac senior economist Matthew Hassan said.
Westpac also reported “a severe loss of confidence around job security” for March.
No change in demand for new home loans
The fall in sentiment came as official data showed that there were no increase in the new housing loans in January, which was below economists’ expectations.
The total value of housing finance commitments was flat at the start of the year, with the number of loans granted at a seasonally adjusted 51,054. Analysts had expected it to rise by 0.5 per cent, Bureau of Statistics figures released this morning showed.
Meanwhile, despite recent disquiet about housing affordability and the influence of foreign investors on the local market, first home buyer activity made a slight comeback in January from last year’s record lows.
The proportion of first home buyers edged up slightly to 13.2 per cent in January, above November’s record low of 12.3 per cent, the Australian Bureau of Statistics reported on Wednesday.
In January last year, first-home buyers made up 15 per cent of the amount of all dwellings financed.
At the same time, the figures showed that housing finance continued to be driven by investors and upgraders as low interest rates boost the residential property sector.
“Record numbers of cleared auctions and solid gains in home prices all point to further growth in finance commitments and housing credit in 2014,” ANZ’s property analysts David Cannington and Paul Braddick said.
“NSW is leading other states in housing finance growth by a considerable margin, reflecting the heat experienced in the Sydney home sales market.”
Sentiment lowest since May
Westpac and the Melbourne Institute’s consumer confidence survey fell to its lowest levels since May, and is now 10 per cent lower than its November peak. The monthly index slipped by 0.7 per cent in March to 99.5 points. Consumer and business confidence had lifted in the months following the September federal election.
“Additional questions surveyed this month on news recall found over two thirds of consumers heard news on ‘economic conditions’ with most viewing the news as negative,” Mr Hassan said.
Thousands of job losses were announced earlier this year at Japanese car maker Toyota, which said it would exit from local production by 2017, spelling the end of the auto manufacturing sector and hurting related industries. Australian airline Qantas has said it will axe 5000 jobs as part of a restructuring push.
‘Severe loss of confidence around job security’
The survey’s sub-index on unemployment expectations rose 5.5 per cent in March to 164.4 points, 13.6 per cent above its November levels.
“At 164.4, the index is at an extreme high only eclipsed by readings during 2008-09 and the recessions in the early 1990s and early 1980s,” Westpac said.
“The surge in the index reflects a severe loss of confidence around job security that can be expected to impact consumers’ financial decisions.”
Mr Hassan said concern around jobs was extraordinarily high. Higher readings indicate more consumers expect unemployment to rise than fall in the year ahead.