As expected consumer sentiment has fallen to its lowest level in nine months on higher petrol prices and concerns about the carbon tax issue.
The result is contrary to the improvement seen in business confidence (and conditions) in the NAB’s February survey, released on Tuesday.
Even though business confidence remains weak, it has recovered as the concerns about the impact of the floods have eased.
Yesterday’s release of the Westpac-Melbourne Institute index of consumer sentiment for March was expected to show a fall, but the size of the drop was a surprise.
It fell 2.4 to 104.1 in March, following a 1.9 increase in February.
While the index is 11.3 below its level a year ago, the number of optimists still outweighs the number of pessimists.
And for that reason, the fall looks temporary, especially with an improvement in the number of people who see better times in the next year.
Westpac chief economist Bill Evans said in a statement that the result was weaker than expected.
"It is the lowest read for the Index since June 2010 in the aftermath of three consecutive rate hikes by the Reserve Bank and controversy over the mining tax," Mr Evans said.
The key factors behind this weak result appear to be concerns over budget and tax issues and petrol prices, Mr Evans said.
"The "news recalled" Index shows that 42.2% of respondents recalled news on Budget and Taxation.
"That compares with normal readings of around 20%," he said.
The survey was conducted in the week when the Reserve Bank of Australia decided to keep the cash rate unchanged at 4.75% and rising fuel and oil prices finally hit the headlines. As well the debate over the carbon tax proposal from the Federal Government erupted.
The largest decrease was registered by the index reflecting family finances over the next 12 months.
However, the component index reflecting economic conditions for the next 12 months rose by 5.7%.
When this reading, the still solid growth in job ads and today’s labour force figures for February are taken into account, the fall in confidence is marginal.
Around 20,000 new jobs is the forecast from the market and an employment rate steady on 5.0%.
