Australian consumer confidence fell to its lowest in more than two years in September as record petrol prices threatened retail spending and economic growth.
The consumer confidence index dropped by 13.3 per cent from August to 100.3, the lowest figure since March 2003, according to survey released in Sydney bya Westpac Banking Corp.and the Melbourne Institute. survey released today in Sydney.
surveys, published released yesterdayby consumer index published by Westpac Bank and the Melbourne Institute, reported an unexpectedly sharp monthly fall of 13.3 per cent in consumer confidence index, its lowest levels in two years.“If petrol prices stay around current levels for the remainder of 2005, we assess that Australians will have increased their spending on petroleum products by A$2.3bn in 2005 over 2004,” Westpac said in a separate economic survey also released on Wednesday. Some $2.1bn of this increased spending would fall in the second half of 2005.Westpacwill
Bill Evans, global head of economics at Westpac, said the effect of a 30 per cent rise in petrol prices could make consumers cut back on spending on other goods and services by increasing debt or by drawing down savings.
However, Mr Evans said it would be “misleading to assume that the increased spending on petrol will all be at the expense of spending on other goods and services” - though reduced consumer spending could lead to an A$0.8bn or 0.2 per cent reduction in real gross domestic product.
“A 0.2 per cent reduction in GDP over the second half of 2005 is not insignificant, but certainly not enough to impact upon interest rates, or the general growth momentum of the economy,” Mr Evans said.
The average price of petrol in Australia has risen to around A$1.31 a litre this week, up 38 per cent since the start of the year.
The high prices are increasingly unpopular, and the opposition Labor party has attacked the conservative coalition government for not cutting fuel taxes.
But Australia is the fourth lowest fuel taxing country in the world. Changes in its oil prices are largely set by global markets, exchange rates, and the margins charged by petroleum companies.
Despite the sudden fall in consumer sentiment, Australia’s All Ordinaries index surged to a record intra-day high of 4,479 before a record close up 17 points to 4,474.
Some market observers saw this performance as a sign that the Australian market was not tied to Wall Street, which has suffered from the impact of Hurricane Katrina and high oil prices.
Strong rises in Australian banking, resources and, surprisingly, retail stocks, were behind the local market’s surge.
Australian clothing retailer Just Group, for instance, on Wednesday posted a 4.1 per cent increase in net profit to A$41.6m despite difficult retail trading conditions, according to brokerage Commsec.
Retailers fear the impact of weakening consumer sentiment, though Westpac’s Mr Evans believed sentiment could rebound in a few months unless there was sharp jump in petrol prices.
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