2019-10-22 09:34:281970-01-01 00:00:00

Consumer Confidence Down 

Consumer sentiment has fallen by 0.6% in June despite the Reserve Bank of Australia’s (RBA) rate cut earlier in the month, according to Westpac.

Survey interviews conducted by Westpac-Melbourne Institute indicate that the consumer sentiment index dropped from 101.3 in May to 100.7 in June. Both of these figures were below the long term average of 101.5.

Many Australians were reluctant to spend despite the falling interest rate, blaming the minuscule wage growth, falling house prices, and record household debt. It was clear that the RBA’s decision had failed to boost consumer confidence.

Jonathan Brown, a spokesperson for the consumer website Choice said that “many Australians are feeling financially stretched by the impact of rising health insurance costs,” and found “three in five Australians are worried about their level of disposable income and the rising cost of health.”

Attempt to boost consumer confidence

Earlier in June, the RBA decided to reduce the official cash rate by 25 basis points, due to a lack of growth in international trade and “increased uncertainty” in the global market. The weak growth and uncertainty had left Australians more inclined to save. The Bank recognised that this uncertainty flowed into household consumption as a result of a “protracted period of low income growth and declining housing prices.”

The RBA’s decision was driven by  unfavourable unemployment and stalling inflation. The bank believed a reduction in the cash rate will “assist with faster progress in reducing unemployment” and “towards the inflation target.” Ultimately, the RBA expected the growth in household disposable income to improve which would support consumption.

The rate cut, which was passed on to consumers by some of the commercial banks in full and some in part, attempted to encourage Australians to spend more. Of the big four banks, CBA and NAB passed on the rate cut in full to their mortgage loan rates. Westpac and ANZ, however, only reduced their mortgage loan rates by 20 and 18 basis points respectively.

The outcomes appeared to have worked as intended, reflected in a 1.8% rise to 116.9 in the “Time to buy a dwelling” index. “House price expectations” index grew by 22.7% to 109.7 according to Westpac. However, the house prices index itself remained well below the average of 126.4.

Consumer sentiment was disappointing in other segments. The official interest rate reduction did not encourage consumers to spend more on household goods, which was reflected in the “Time to buy a major household item” index. The index dipped 0.2% to 115.5 in June, far below its average of 127.3. Current economic conditions suggests that consumer spending is likely to remain weak in the short term.

Unemployment expectations index recorded a 5.1% increase, wiping out all of the previous month’s decline. Hence, most Australians expect unemployment to rise in the year ahead. The volatility in the unemployment expectations index suggests that labour market conditions may be shifting. However, according to the responses from past rate cuts, there was no tendency for confidence to shift favourably immediately following the cut.  

Retailers’ sales frenzy

Ahead of the end of financial year sales, falling consumer confidence has alerted the Australian retailers, with many opting to offer discounts in advance. Finder.com, a price comparison site that offers discount deals from leading brands, has indicated that retailers have already gone into a “sales frenzy”. Mr Brown said that “retailers are trying to fill the year with lots of different sales events,” but in the end, it was about “shoring up their finances.”

The sports retailer Rebel was offering 50% off shoes and 30% off all clothing. The Iconic, a fashion website, was advertising a 60% discount on 35,000 different items. David Jones was slashing prices on homewares and bedding of up to 50%. In the car dealing segment, Holden dealers were offering savings of up to $5,000, including three years’ worth of free scheduled servicing.

Mia Steiber, a shopping expert, indicated that Australians did not like to shop if items were not on sale. She said, “We as shoppers have been programmed to know that if something isn’t on sale, it will be soon enough – particularly in times of economic uncertainty.”

According to the ABS, data showed that retail sales fell 0.1% in April, spending on household goods fell by 0.9%, and other retailing goods dropped by 1.2%. The falling figures indicated a big slowdown in the retail industry and a lack of confidence among consumers.

Will the economy improve?

The RBA mentioned that the Board will continue to “monitor developments” closely and “adjust monetary policy to support sustainable growth in the economy”. Many had already predicted another rate cut later in the year and with the current market sentiment, it is more likely for the cash rate to be around 1% by the end of the year.

It is too early to determine the effect of the rate cut on the economy. However, what is absolute is that if the Australians continue to shy away from consumer spending, another rate cut is unlikely to improve the stalling Australian economy.

By Jack Lee

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial