Consumer confidence has fallen sharply in July to the lowest level since May 2009, a survey shows.
The Westpac-Melbourne Institute Consumer Sentiment index is down 8.3% from June to 92.8.
Westpac (ASX:WBC) chief economist Bill Evans said this was “a surprisingly weak result,” one not seen since the economic crisis.
He added that the index is at levels similar to the period in which the introduction of the GST coincided with the bursting of the dotcom bubble.
“It appears that a combination of concerns over the European financial crisis, the ongoing impact of the seven interest rate hikes between October 2009 and November 2010 and uncertainty about the introduction of a price on carbon are now really undermining the confidence of consumers,” he said.
The survey closed the day before the government announced details of the decision to price carbon and the associated compensation packages.
Confidence is wavering despite a very low unemployment rate of 4.9%, Evans said, noting that the June index - which was also at a two-year low – showed a deterioration in respondents' assessments about the jobs outlook.
The one positive aspect of the survey was that confidence in housing grew 3.3% to its highest level since January 2010.
A majority of respondents still expect house prices to rise rather than fall, but the size of the majority has shrunk since April.
Evans said that while markets are pricing in a likely interest rate cut, based on global economic circumstances he does not expect the Reserve Bank to change the cash rate for the remainder of the year.
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