Consumer confidence slips as rates rise

Core retail spending last month was higher than in June. Photo / Natalie Slade

Consumer confidence has fallen in the Westpac McDermott Miller survey, reflecting less cheerful economic news and a flurry of interest rate rises from the Reserve Bank.

McDermott Miller managing director Richard Miller said the survey was conducted during the election campaign, with people asked about their expectations for the economy over the next three years should the National Party form the next Government. "Some 46 per cent of consumers expect good times if this is the case, and 19 per cent expect bad times," Miller said.

The consumer confidence index at 116.7 was down 4.4 points from the previous quarter's survey. Any level above 100 indicates optimists outnumber pessimists.

"Although confidence has undoubtedly and unsurprisingly headed south, the overall level of confidence remains elevated," said Westpac economist Anne Boniface.

"What's more, while economic optimism peaked back in March at levels last seen briefly during the mid-1990s and mid-2000s, actual growth in consumer spending in recent times has never looked like reaching such dizzying heights," Boniface said.

"Consequently, the more cautious attitude of consumers toward spending on the way up could well mean consumer spending remains relatively robust even as confidence eases."

Respondents' views of their own current and expected financial situation both slipped - the former more than the latter - but the biggest decline was in expectations of the economic outlook one year ahead. A net 18.3 per cent still expect it to improve but that is down from a net 30.8 per cent in the June survey.

A net 26.1 per cent consider it a good time to buy a major household item, which is down 5.4 per cent from June and almost entirely reversed the increase observed over the previous three quarters.

"That brings this series back to a touch below long-run average levels, and may be an early sign of consumers becoming a touch more cautious with their spending as the economy has shifted down a gear and interest rates have risen," Boniface said.

"The impact of higher interest rates is also consistent with a tick up in the proportion of people who would use a $10,000 cash windfall to pay down debt, which increased to 27 per cent, and a slight reduction in the proportion of people who would spend the cash."

See the latest Westpac consumer confidence index here: