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(Bloomberg) — Australia’s consumer sentiment slipped into “deeply pessimistic” territory as households struggle with cost of living pressures and emerging concerns over the housing market following tax changes.
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The Consumer Sentiment Index fell 2.9% to 80.6 points in June, Westpac Banking Corp. said in a statement on Tuesday. Australian households report more pressure on finances and are fearful about the year ahead, it said.
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“The latest monthly index read is back amongst the weakest seen in the 50-year history of the survey,” said Matthew Hassan, Westpac’s head of Australian Macro-Forecasting. “The survey detail shows cost-of-living issues remain front and center.”
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The center-left government’s budget released last month has been poorly received by voters, who are struggling with elevated inflation, rising interest rates and an energy shock from the Iran war.
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While the government introduced a temporary cut to fuel tax excise to ease the burden from gasoline prices, the annual fiscal blueprint limited additional spending to avoid spurring inflation further.
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Labor also clamped down on tax breaks for property investors that have helped distort the housing market in the past couple of decades. While the goal was to rebalance the market, the changes have led to worries over the outlook for prices among Australia’s highly geared home owners.
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That’s been reinforced by the Reserve Bank raising rates three times this year to return the benchmark to 4.35%, unwinding last year’s brief easing cycle, as it tries to gain control over inflation.
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“Housing-related sentiment continues to look very unsettled, reflecting a mix of price declines in some markets, actual and expected interest rate rises, and the major tax policy changes affecting investor housing announced in the Federal budget,” Hassan said.
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“Consumer savings attitudes point to a significant rise in risk aversion and a notable shift in how ‘real estate’ is being viewed,” he added.
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The report also showed:
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- The family finances vs a year ago and family finances, next 12 months sub-indexes both dropped sharply, down 7.5% and 8.5%, respectively
- The economy, next 12 months sub-index lifted 4.9% in June but remained at a very weak level overall at 77.8, down 15.8% on a year ago
- The economy, next 5 years sub-index fell 3.2% to 86.5, sinking to a three-year low
- The Westpac–Melbourne Institute Unemployment Expectations Index was largely unchanged
- The Westpac–Melbourne Institute Index of House Price Expectations fell 14.9% to 128.2 dropping below the long-run average of 130 for the first time in nearly three years
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