ANZ-Roy Morgan Consumer Confidence has lifted by 2.5pts to 74.9 this week, the largest increase since the first week of 2023.
Despite the increase, the index has now spent seventeen straight weeks below the mark of 80 – the longest stretch since the index began being conducted on a weekly basis in October 2008.
Consumer confidence is now 9.8pts below the same week a year ago, and 4.1pts below the 2023 weekly average of 79.0.
ANZ and Roy Morgan noted there were positive moves for personal finances and views on the longer-term prospects for the Australian economy this week with other indices largely unchanged.
Now only 20% of Australians (up 5ppts) say their families are ‘better off’ financially than this time last year compared to 55% (down 1ppt) that say their families are ‘worse off’ financially.
ANZ senior economist Adelaide Timbrell said confidence in ‘Future financial conditions’ fell to its weakest since March 2020 - ahead of the Reserve Bank of Australia (RBA) July meeting - which ANZ expects will involve another cash rate increase.
“Perhaps related to shaky financial confidence, inflation expectations jumped 0.4ppt to 5.9%, its highest since mid-March,” Timbrell said. “But ‘Future economic conditions’ confidence was at its highest in four weeks.
“Confidence fell among those paying off their homes, who continue to have much lower confidence than renters and outright owners (the highest-confidence cohort).”
The latest inflation expectation figures show that the back-to-back decreases in April and May have not been sustained, according to Roy Morgan, with weekly inflation expectations rising throughout June and now at 5.9%.
The second consecutive monthly decrease in Inflation Expectations in May came after the Albanese Government’s first Federal Budget and after the RBA resumed increasing interest rates.
The RBA subsequently increased interest rates again in early June, up by a further +0.25% to 4.1%.
Looking longer-term, Roy Morgan report that Inflation Expectations have averaged 5.4% so far during 2023 and are down from a monthly high of 6.5% in November 2022 and down significantly from a weekly high of 6.8% in early November.
Inflation expectations dropped in New South Wales, Queensland and Tasmania in May, and increased in Victoria and Western Australia.
Inflation expectations in country areas were at 5.6% (down 0.1% points from April) and remain higher than in capital cities at 5.0% (down 0.1% points).
Roy Morgan CEO Michele Levine said the rebound in inflation expectations from June suggests analysts should be wary of a fall in this week’s ABS monthly inflation estimates for May – set to be released tomorrow on Wednesday, June 28.
“The fall in Inflation Expectations was the second straight monthly fall in the index and coincided with a fall in the average retail price of petrol which fell by over 10 cents per litre during May to $1.78 per litre – the lowest petrol price so far this year,” Levine said.
“We have often seen during the last 18 months that the price of petrol has a significant impact on the Inflation Expectations of Australians and since bottoming at $1.74 per litre in mid-May petrol prices have again increased significantly – to an average of over $1.90 per litre in mid-June.
“Looking longer-term, Inflation Expectations have now averaged 5.4% so far during 2023, significantly above the RBA’s inflation target of ‘2-3% over the course of the cycle’, but also well below the peak of 6.8% in early November.
“These results suggest that although Inflation Expectations are lower than they were towards the end of 2022 – they have been sticky so far during 2023 between 5.0%-6.0%. In recent years we’ve seen Inflation Expectations play a key role as a leading indicator of the official ABS inflation numbers released weeks, or months, later.
“Interestingly, there is a key split that persists around Australia in terms of how different regions expect inflation will go over the next two years. Australians in Country Areas now expect inflation of 5.6% over the next two years compared to only 5.0% for those in the Capital Cities.
“These results show that inflation is not hitting all Australians equally and people living in Country Areas are consistently feeling the price increases in the economy to a greater degree than those in the larger Capital Cities. Inflation Expectations in Country Areas have now been higher than those in Capital Cities stretching back nearly three years to June 2020.
“The next ABS CPI monthly inflation figures for May are released tomorrow. If the trends we have seen in recent months continue we can expect to see a decline in the official monthly CPI results which will follow the monthly Inflation Expectations figures for May released today.”