CANBERRA, AAP – Sydneysiders remain down in the dumps with confidence falling sharply in the past week following the extension of the NSW virus lockdown to the end of this month.
However, Australians have got a spring back in their step in other parts of the country after restrictions were eased in Victoria and South Australia.
Overall, the weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – rose 1.1 per cent after two weeks of hefty falls.
Confidence slumped by seven per cent in Sydney, but was partly offset by a two per cent rise in Victoria and a 2.9 per cent increase in South Australia.
Sentiment in Brisbane was also up 2.7 per cent, but the majority of the survey was completed before the three-day lockdown in southeast Queensland was announced, ANZ head of Australian Economics David Plank noted.
That snap lockdown has since been extended until next Sunday.
Mr Plank said while below the long-run average, overall consumer confidence is well above the levels seen during Melbourne’s long second lockdown last year, suggesting the economic impact of the current lockdowns is likely to be considerably less than in 2020.
Such sentiments will have to be weighed up when the Reserve Bank of Australia board holds its monthly monetary policy meeting on Tuesday.
Economic circumstances have changed markedly since the board last gathered in early July.
In July, RBA governor Philip Lowe was talking about a “positive path” for the economy after recovering from last year’s recession stronger than expected.
But four weeks on, the outlook has darkened with economists now predicting a sharp economic contraction in the September quarter.
This is largely the result of the lengthy virus lockdown in Greater Sydney and regional NSW areas.
Last month’s lockdowns in Victoria and South Australia will have also left a negative mark, as will the current restrictions in Queensland.
When the RBA board last met, and given the then rosy outlook, it agreed to wind back on its bond-buying program, which aims to keep market interest rates and borrowing costs low.
Instead of buying $5 billion of government bonds a week under its current program, from September this will reduce to $4 billion.
But given the RBA is reluctant to reduce the key cash interest rate any further to stimulate the economy – it’s already at a record low 0.1 per cent – economists expect the so-called tapering of bond purchases to be put on hold.
“The dramatic change in the outlook for the economy for the current half since the last meeting is likely to see the RBA delay the step down in its bond buying from September until early next year when the outlook improves again,” AMP Capital chief economist Shane Oliver said.