Falling petrol prices have given a further lift to consumer confidence, but a new survey still shows pessimists outweighing optimists.
The ANZ-Roy Morgan consumer confidence index – a guide to future household spending – rose 2.3 per cent in the past week to 96.8, its highest level since March 6, but remained below the neutral level of 100.
In a mirror image, household inflation expectations dropped by 0.5 percentage points to 5.3 per cent, its lowest level since March 6 as petrol prices declined for a fourth straight week.
“Oil prices have risen more than 10 per cent from the low at the beginning of last week, so it’s not clear if there is much more room for confidence to be boosted by lower petrol prices,” ANZ head of Australian economics David Plank said.
The Australian Institute of Petroleum said the national average for petrol prices fell by a further eight cents in the past week to 166.3 cents a litre, continuing a sharp decline from above $2 a litre.
This reflects in part the federal government’s temporary halving of fuel excise in last month’s budget.
Still, cost of living pressures remain more broadly in the economy with next week’s inflation figures expected to show a sharp rise.
In the minutes of the Reserve Bank of Australia’s April board meeting it warns that rising inflation may have brought forward the timing of an increase in the cash rate.
It expects measures of underlying inflation in the March quarter to be more than three per cent – above its two to three per cent target.
But it indicated it still wants to see the consumer price index for the March quarter due on April 27 and the wage price index for the same period on May 18.
Economists are generally expecting the cash rate to increase by 0.15 per cent to 0.25 per cent at the June board meeting, ending a gradual decline in rates stretching back a decade.
However, there are concerns a very strong inflation result could see the cash rate jump by 0.4 per cent to 0.5 per cent at the May board meeting, even though it would be in the middle of a federal election campaign.