Consumer gloom persists

In an early warning sign for Joe Hockey, consumers already are showing signs of anxiety before the treasurer’s second budget.

The Reserve Bank will also be disappointed that lower interest rates are merely calming nerves rather than giving an adrenaline boost.

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Australian stockmarket falls sharply
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In the first consumer response to Mr Hockey’s intergenerational report, which showed Australians would be living and working longer over the next 40 years, confidence has fallen to a three-month low.
 The ANZ-Roy Morgan consumer confidence index is now below its 25-year average.

The index tumbled sharply in response to Mr Hockey’s first budget attempt 10 months ago.
”Confidence clearly remains fragile … to any negative news around the federal budget and economy,” ANZ chief economist Warren Hogan said on Tuesday.

Potential positives such as the February interest rate cut, lower petrol prices and higher house prices have only worked to offset the negatives rather than giving a boost.

The cut in the official cash rate to an all-time low of 2.25 per cent also failed to lift the spirits of the business community.
 The National Australia Bank business confidence index for February dropped to its lowest level since before the September 2013 federal election and below its long-term average.

“Perhaps the rate cut acted as a stark reminder of the significant headwinds facing the economy,” NAB chief economist Alan Oster said.
 NAB is expecting another rate cut in May and beyond that would depend on rising unemployment, which it expects to be 6.7 per cent by the end of this year.

The intergenerational report also controversially showed what would happen under the policies of Labor before it lost government in 2013.
 Debt would haven risen to 120 per cent of GDP and budget deficits were heading towards 12 per cent of GDP.

That compares with 23 per cent and 2.5 per cent predicted for this financial year.
 Mr Abbott used the analysis to take a swipe at Labor.

“They were going to saddle future generations of Australians with debt and deficit at Greek levels,” he told reporters in Kalgoorlie.

Shadow treasurer Chris Bowen hit back, saying not a day goes by without a member of the government comparing Australia’s reasonable budget position to Greece.

“No wonder business and consumer confidence is so low,” Mr Bowen said in a statement.


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