Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
Confidence among consumers has dropped to its lowest level since December, coinciding with nervousness in financial markets over increasing trade tensions between China and the US.
A separate survey on Tuesday also showed sentiment among businesses now stands at a low for 2018.
The weekly ANZ-Roy Morgan consumer confidence index dropped for a third consecutive week, declining 0.3 per cent.
Confidence is a pointer to future retail spending.
However, it is not all bad news with people’s views differing between the economic outlook and their financial conditions.
“We believe global news has dictated sentiment around economic sentiment, while more fundamental factors, such as continued employment growth, have helped maintain confidence in financial conditions,” ANZ head of Australian economics David Plank said.
The National Australia Bank’s monthly business survey showed confidence has also weakened in March from previously elevated levels to stand only just above its historical average.
At the same time, business conditions weakened from previously reported record levels but still point to robust business activity.
NAB chief economist Alan Oster said the level of business conditions is consistent with stronger economic growth in coming quarters while the survey’s employment index is still pointing to solid jobs growth of around 21,000 positions per month.
This should reduce unemployment and put gradual upward pressure on private sector wages, leaving the Reserve Bank in a position to start lifting the cash rate from its record low 1.5 per cent towards the end of the year, he says.
“It will depend heavily on the data flow – particularly for wages and inflation – and the risk is that any action by the RBA will be delayed,” Mr Oster said.
A separate analysis has also questioned the Reserve Bank’s view of what level it considers full employment – the so-called non-accelerating inflation rate of unemployment (NAIRU), that is, an unemployment rate consistent with maintaining stable inflation.
The central bank estimates NAIRU to be five per cent.
But Commonwealth Bank economist Gareth Aird believes it might be lower, which unfortunately for workers could mean any significant rise in wages is still some way off.
He points to the nation’s most populist state, NSW, where the jobless rate has been at 4.75 per cent for the past year and yet wages growth has not lifted.
“Ultimately we won’t know where the NAIRU is until we get there. But if the RBA is wrong then the NAIRU is almost certainly going to be lower than five per cent not above it,” Mr Aird said.
The unemployment rate sits at 5.6 per cent.