Consumer confidence is waning, raising fears that growth this year will be modest at best, according to the latest WestpacTrust McDermott Miller survey.
Expectations of higher mortgage rates, due to the rise in fixed interest mortgages, are the most likely cause of the decline in confidence in the June quarter, WestpacTrust's
chief economist Bevan Graham said.
"Consumers were possibly also disappointed that the Government was not able to flag more immediate tax cuts in the budget."
The 2.2 per cent decline in confidence from March reinforced the view that much of the strength in retail spending in recent quarters had been catch up from last year, when the Asian crisis had dampened the impact of tax cuts and the benefits that flowed from the demutualisation of AMP.
Growth in retail spending is likely to be more subdued in the immediate future as the lacklustre export sector fails to spark a more robust expansion, Mr Graham said.
The results of the survey were in line with the bank's prediction of between 2 per cent and 2.5 per cent gdp growth this calendar year, rising to 3.5 per cent in 2000.
No tightening in monetary policy is anticipated before next March.
Confidence remained strongest in the metropolitan centres. The largest decline was in Waikato - where the dairy season was shortened by drought.
Otago had the strongest rise in confidence followed by Northland, Gisborne/Hawkes Bay and Taranaki/Manawatu/Wanganui. - STAFF REPORTER
