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Consumer confidence cools amid GST talk

Concerns about possible changes to the GST may be stoking pessimism. Photo: Erin JonassonConsumer confidence has slipped after two upbeat months, according to the latest Westpac-Melbourne Institute sentiment index, as the cooling housing market, talk of a rise in the GST and worries about family finances began to weigh on the mood.
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Westpac said on Wednesday that its main consumer sentiment index eased 0.8 per cent this month, from 101.7 points in November to 100.8 points, seasonally adjusted.

When the index tops 100 points, it means optimists outnumber pessimists – and this is only the fourth time in the last 20 months that the glass-half-full brigade has won the day.

However, this month’s slight fall follows a near two-year high last month, when the index surged 3.9 per cent, and a healthy 4.2 per cent jump in October after Tony Abbott was dethroned by Malcolm Turnbull as prime minister.

“The Index has held on to most of the gains from last month’s surprise 4 per cent lift and is 10.7 per cent above its levels this time last year,” said Westpac’s chief economist Bill Evans. “There have only been two months since January 2014 with higher Index readings.”

The survey asked respondents to list news items that attracted their attention, and the proportion of consumers recalling the topic of budget and taxation has almost doubled since September.

Mr Evans said this topic was also viewed as considerably less favourable.

“Presumably, speculation around tax changes, particularly with respect to the GST, is beginning to unnerve respondents,” he said.

While the sub-index on expectations of future economic conditions fell, the sub-indices for family finances – reflecting both current conditions as well as expectations over the next 12 months – both showed healthy gains of more than 5 per cent.

And slightly more people surveyed think it’s a good time to buy a major household item.

“There is an important message from the movements in the components of the Index,” Mr Evans said. “Last month we saw a surge in sub-indexes measuring the economic outlook whereas respondents’ assessments of their finances deteriorated. We attributed the economic  boost to confidence in the government’s new leadership team, and the concerns around finances to the banks’ mortgage interest rate increases in October.

“In this month’s survey, assessments around finances have almost fully recovered their October levels, but expectations for the economic outlook have been pared back, albeit with these components still well above their October levels.”

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