While the dip in consumer confidence does not bode well for retailers, ANZ's chief economist Sharon Zollner says the Reserve Bank will be satisfied to see consumers tightening their belts. Photo: 123RF
Consumer confidence has dipped slightly in July as sentiment remains subdued with more signs job security is under threat in the cooling economy.
The latest ANZ-Roy Morgan survey showed consumer confidence fell two points in July to sit at 83.7, still deeply in pessimism territory.
"While perceived job security has been a bright spot for consumers in recent years, it seems likely that this perception will change as the economy continues to cool," ANZ's chief economist Sharon Zollner said.
More consumers believe it is not the right time to buy a major household item with that measurement taking a sharp 12-point hit in the latest survey.
Zollner said while that did not bode well for retailers, the Reserve Bank would be satisfied to see consumers cutting back their spending.
"Adrian Orr instructed consumers to cool their jets because if households reduce their spending that makes it harder for firms to fully pass on all their cost increases," she said.
"The data that we're seeing is consistent with consumers doing that."
Households are currently buffeted by the cost of living and the rapid rise in mortgage rates.
"Those respondents who are paying down mortgages are more pessimistic on every question except for how things might look for them personally a year from now - which is consistent with expectations that interest rates may be lower by then."
Inflation expectations bounced back almost completely from their sharp fall last month, rising from 4.3 percent back up to 4.7 percent - still well off their high of over 6 percent last last year.
Zollner said that remained within the context of a falling trend and could be attributed to the petrol price subsidies coming off in June.
"Tailwinds exist too - the housing market is lifting, though we don't expect it to come to much, given we are forecasting recession. And fiscal policy is currently very supportive. Population growth will also support total spending, though not on a per capita basis."