Carbon tax hits consumer confidence

The latest Roy Morgan research reveals consumer confidence has fallen 2.6 points in a week to 116.2 points, as the carbon tax debate heats up and international disasters continue.

The latest Roy Morgan Consumer Confidence Rating, based on a survey of 1,033 Australian consumers, shows consumer confidence is now 11.3 points lower than a year ago.

According to the agency’s executive chairman, Gary Morgan, the fall has been driven by Australians’ reduced confidence across all components of the survey, namely whether now is a ‘good time to buy’ and personal financial situations.

The survey reveals 54% of Australians believe now is a good time to buy – the lowest reading since December last year – while 20% believe now is a bad time to buy; the highest reading since November.

With regard to personal finances, 28% of Australians say their family is better off financially than a year ago, with the figure down 2%.

This compares to 31% who believe their family is worse off financially than this time last year, which is up 1%.

In terms of the economy as a whole, 35% expect Australia will have ‘good times’ financially during the next 12 months, compared to 26% who say the country will experience ‘bad times’ financially.

According to Morgan, the falls come as discussion continues about the “likely impact” of the Gillard Government’s proposed carbon tax.

“In addition, given the recent troubles in the world including the Japanese earthquake, tsunami and nuclear power plant problems at Fukushima – and also last week’s decision by the United Nations to authorise military action in Libya – this week’s drop in consumer confidence is not unexpected,” Morgan says.

Meanwhile, the Reserve Bank of Australia is warning the banks to prepare for lower rates of credit growth as caution in the household sector spreads to corporate Australia.

In its latest review of the financial system, the RBA says home lending has been the only source of credit growth over the last six months, while business lending has been contracting at an annualised 4.3% rate.

“Like households, many companies are apparently adopting a more cautious approach to the use of debt,” the review says.

According to the latest ANZ Economic Update, the banking system continues to perform better than in many countries.

“Australia’s economic growth is supporting the financial positions of both the household and business sectors, with both sectors exhibiting a more cautious approach to borrowing,” the report says.

“While household indebtedness remains historically high, indicators of financial stress are relatively subdued.”

ANZ says as the global economy continues to recover, the RBA believes the challenge for Australian institutions and regulators will be their ability to “manage an expansion under post-crisis conditions”.

The RBA argues the previous rapid increase in the growth of credit mainly reflected a one-off adjustment to financial deregulation and the shift to low inflation.

“Going forward, the financial system will need to adjust to a slower rate of expansion of balance sheets and one that is more easily funded by deposits,” it says.

“Australian banks will have to also deal with significant changes in the regulatory environment, though the RBA sees Australian banks as well placed to meet the new capital requirements.”