Consumer confidence has dropped to an eleven-month low, in the midst of continuing COVID-19 lockdowns and heavy retail restrictions.
However, the fall of 4.4 per cent to 104.1 on the Westpac-Melbourne Institute Consumer Confidence isn’t as bad as initially feared, with public sentiment remaining in positive territory. The index is far from the lows suffered during the height of last year’s national lockdown.
“The virus situation locally is clearly troubling, but consumers appear reasonably confident that it will come back under control, and that once it does, the economy will see a return to robust growth,” Westpac senior economist Matthew Hassan said.
The Reserve Bank of Australia has forecast a contraction this quarter, but expects a rapid rebound to begin from October, and continue through the December quarter.
“The apparent resilience of consumer sentiment will give some comfort to the RBA, suggesting the consumer and the wider economy remain well placed to snap back once virus restrictions ease,” Hassan explained.
“Westpac’s central case remains that widespread vaccination will see a reopening recovery underway by the November board meeting, meaning this will still be an appropriate time for the Reserve Bank to start scaling back its bond purchases.”
Hassan adds that Westpac believes the RBA will begin raising the cash rate in the March quarter of 2023.
The RBA estimated a 15 per cent in consumer spending during periods of lockdown.
