Confidence among Australian consumers declined sharply in May to its lowest level since August 2012, driven largely by negative responses to the Federal Budget, a survey by Westpac and Melbourne Institute showed Wednesday.
The index of consumer sentiment fell 7 percent in May to 97.6 from 104.9 in April. This is the lowest reading since August 2012. The survey also revealed that pessimists outnumbered optimists in May for the first time since October 2012.
Over the last two months, the index fell 11.7 percent, fully reversing a combined 9 percent increase in February and March. The decline in confidence despite the Reserve Bank's quarter-point reduction in cash rate to a record low on May 7 reflects households' concerns about the larger-than-expected deterioration in the fiscal position as revealed in the budget.
"In this survey we added an additional question around respondents' assessments of the Budget and the results confirm our reasonable assumption that this weakness in confidence is being driven by a sharply negative response to the Budget," Westpac's Chief Economist Bill Evans said.
"Absent any other major influences, we would have expected a solid boost to the Index following that rate cut," Evans said.
The sub indexes tracking views on family finances compared to a year ago fell 8 percent and the one-year ahead outlook on family finances declined 7 percent. The economic outlook also deteriorated with the corresponding measure falling 13.4 percent.
"The dissatisfaction is not only due to concerns around some of the savings measures in the Budget, but also the sharp deterioration in the fiscal position, indicating renewed fears about the overall state of the economy," Evans said.
"These concerns are also likely to have been fueled by the surprise fall in the Australian dollar before and during the survey period," he added.
The survey compiles responses from randomly selected 1,200 people and was conducted between May 13 and 18.
Treasurer Wayne Swan presented the budget on May 14, in which the government confirmed a delay in return to surplus as strong currency and falling commodity prices weighed on tax receipts.
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