Itâ€™s been assumed the Australian economy will continue to roar out of the Covid downturn, powered by the $250 billion or so that households have apparently stashed away during the pandemic.
Well that was before Russiaâ€™s invasion of Ukraine came along to elevate prices for just about everything, including, of course, petrol and diesel.
ANZ-Roy Morgan has captured some of that consumer funk, showing confidence among consumers has started to crumble. Their weekly sentiment gauge has dropped almost 5% to the lowest level since September 2020when the second Covid wave was just getting going.
The fall was across all states and territories.
â€œThe weakness in consumer confidence presents a growing near-term risk to the outlook for household spending,â€ David Plank, a senior ANZ economist, said.
But the other risk has to be the jump in what people expect will happen to prices. Spoiler: they expect them to rise, a lot.
The inflation expectations are now up to 6%, or about a decadeâ€™s high. Just how rapidly they have taken off will be noted by the Reserve Bank.
They also keep an eye on the other Reserve Bank, of New Zealand. They are already lifting interest rates, and by the looks of how inflation expectations are going, they have a ways to go:
With Australiaâ€™s federal budget out next Tuesday, itâ€™s a challenging job for the Treasurer Josh Frydenberg for his fourth budget – how to offer voters help to deal with cost of living (plus various margin-seat bribes) while not poking the inflationary possum further.
His Labor counterpart Jim Chalmers– who will be hoping it will be Frydenbergâ€™s final budget – is warning today that households and government will have to cope with rising interest rate bills. Heâ€™s also planning his own budget this year, if Labor gets elected, as we wrote about here:
You have to wonder if that might become a thing for any incoming Commonwealth government – put out your budget, first chance you get.