May 03, 2022

ANZ-Roy Morgan Consumer Confidence drops 5.8pts to 90.7 as inflation is reported higher than expected and interest rate rises are predicted

Topic: Consumer Confidence, Press Release
Finding No: 8970
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ANZ-Roy Morgan Consumer Confidence dropped significantly this week, down 5.8pts to 90.7. This was the biggest weekly fall in the index since early January during the height of the ‘Omicron wave’ of COVID-19 and came after the ABS reported a CPI of 5.1% for the year to March 2022 – the highest CPI for over 20 years since the introduction of the GST.
Consumer Confidence is now at its lowest since Victoria’s second wave of COVID-19 in August 2020 and is a significant 22pts below the same week a year ago, May 1/2, 2021 (112.7). The measure has also dropped 7pts below the 2022 weekly average of 97.7.
A look at Consumer Confidence by housing status is revealing with the measure down almost 10pts amongst those ‘paying off their home’. In contrast, the fall was of a smaller magnitude for those who own their own home (down 4.6pts) and for those who are renting (down 3.8pts).
A look at the different States shows the fall was not uniform around the nation with large falls in NSW, Queensland and South Australia only partly offset by increases in Victoria and Western Australia.
A look at the index shows it is measures related to personal finances and whether now is a ‘good/bad time to buy major household items’ that led the move lower this week with some indicators at their lowest levels for over two years since April 2020.

Current financial conditions

  • Now just a quarter of Australians, 24% (down 1ppt) say their families are ‘better off’ financially than this time last year compared to 37% (up 4ppts), that say their families are ‘worse off’ financially.

Future financial conditions

  • Looking forward, under a third of Australians, 31% (down 2ppts) expect their family to be ‘better off’ financially this time next year (the lowest figure for this indicator for over two years since April 2020) compared to just over a quarter, 27% (up 4ppts), that expect to be ‘worse off’ financially (the highest figure for this indicator for over two years since April 2020).

Current economic conditions

  • Now only 10% (down 3ppts), of Australians expect ‘good times’ for the Australian economy over the next twelve months compared to 30% (up 5 ppts), that expect ‘bad times’.

Future economic conditions

  • In the longer term, just 15% (unchanged), of Australians are expecting ‘good times’ for the economy over the next five years compared to 18% (down 1ppt) expecting ‘bad times’.

Time to buy a major household item

  • The prospect of interest rates increasing has led to buying intentions deteriorating this week, with 28% (down 4ppts) of Australians, saying now is a ‘good time to buy’ major household items (the lowest figure for this indicator for over two years since April 2020) while 42% (up 6ppts) say now is a ‘bad time to buy’.

ANZ Head of Australian Economics, David Plank, commented:

Consumer confidence plunged 6.0% last week, its sharpest fall since the 7.6% drop in mid-January due to the Omicron surge. The strong inflation result of 5.1% y/y was likely the primary driver of the drop in confidence as it increases the prospect of interest rate hikes by the RBA in the near future. This is supported by the fact confidence dropped 9.6% amongst people ‘paying off their home loan’, while for people who already own their home or are renting confidence dropped by 4.7% and 4.2% respectively. Inflation expectations increased 0.2ppt to 5.3% last week as average petrol prices rose nationally. This is the lowest level for consumer confidence at the start of a tightening cycle since the inflation targeting regime began in the early 1990s. This may see the RBA tighten more slowly than the market is pricing."

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Margin of Error

The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.

Sample Size Percentage Estimate
40% – 60% 25% or 75% 10% or 90% 5% or 95%
1,000 ±3.0 ±2.7 ±1.9 ±1.3
5,000 ±1.4 ±1.2 ±0.8 ±0.6
7,500 ±1.1 ±1.0 ±0.7 ±0.5
10,000 ±1.0 ±0.9 ±0.6 ±0.4
20,000 ±0.7 ±0.6 ±0.4 ±0.3
50,000 ±0.4 ±0.4 ±0.3 ±0.2

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