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ANZ analysts suggest that there is little evidence of the expected (and hoped for) positive impacts of rate and tax cuts on the private sector – aside from in the housing market for the Australian economy.

Key Quotes

“Following last Friday’s disappointing 0.4% rise in August retail sales, ANZ-Roy Morgan consumer confidence fell 2.1% during the week, meaning it’s back below the long-run average. Although households still feel quite positive about their current finances, recognising the impact of tax and interest rate cuts on their budgets, they are worried about the economic outlook, and so unwilling to increase spending. This is consistent with the Westpac consumer confidence measure, which fell 5.5% to a four-year low in October.”

“Business confidence hasn’t fared any better, deteriorating to a six-year low in September. Business conditions saw a minor improvement from their five-year low, but key indicators, including profitability, trading and forward orders, remain well under long-run averages. Although the employment index looks more positive, it is still signalling an approaching slowdown. This week we take a closer look at employment outlook, and particular the state-by-state drivers.”

“And so it seems the housing market alone is responding to the monetary stimulus, as well as regulatory easing. Investor lending was up 5.7% m/m and owner-occupier lending was up 1.9% m/m in August. This is consistent with the rebound in auction clearance rates and prices in the month.”