CONCERN about the carbon tax appears to be undermining consumer confidence. The Westpac Melbourne Institute sentiment index slid to its lowest level in two years yesterday, hitting a low last seen in the global financial crisis. Confidence about personal family finances slumped lower than in the crisis.
Asked what type of news they remembered hearing in the past month, an extraordinary 44 per cent of those surveyed mentioned "budget and taxation", almost twice the number who remembered hearing about interest rates and eight times the number who remembered hearing about politics.
"It is unusual for tax to register as so important," the Westpac economist Matthew Hassan said. "We have only ever had recall that big when there are major changes afoot - during the introduction of the goods and services tax in 2000, and during the mining tax debate in 2010.
"In terms of the perceptions, the tax is clearly negative. It comes in at an index level 61 where 100 is neutral - it is not as negative as were perceptions about the mining tax or the GST, but it is clearly negative."
At 101.2 the Westpac Melbourne Institute consumer sentiment index is barely positive after slipping 2.6 per cent between May and June.
Confidence about family finances and the economy has plummeted over the past year.
Only when asked about the economy in five years' time, and whether now is a good time to buy a major household item, have consumer responses improved.
Mr Hassan said the carbon tax would be one of a number of concerns weighing on consumers, others being high utility prices, interest rates and "the absence of any positive supports".
Experience with the GST suggested that as the nature of the carbon tax became clearer and the implementation date approached, confidence would rebound. There was a big rebound in confidence two months before the GST had been introduced in 2000.
A Battle for the Wallet report to be released today by TNS research finds two-thirds of people believe the cost of living to be much higher than it was 12 months ago. Only a third have had a pay rise in the past year.
The Reserve Bank governor, Glenn Stevens, told the Economic Society in Brisbane yesterday that his "central expectation" was that interest rates would have to rise at some point in order to contain inflation. He would "look through" the impact of the carbon tax when deciding whether to push up rates.
