New Zealand Markets closed

Politics hurting consumer confidence

A measure of consumer confidence fell sharply in September as political instability in federal politics and hikes in mortgage rates by most of the big banks soured the public mood.

The Melbourne Institute and Westpac Bank index of consumer sentiment fell 3.0 per cent in September from August when it had already dropped 2.3 per cent.

Wednesday's index, compiled from a survey of 1,200 people, was up 2.7 per cent on September last year at 100.5, meaning optimists only just outnumbered pessimists.

"This is the weakest sentiment read since November last year," said Westpac Chief Economist Bill Evans.

"The detail suggests that confidence has been affected by increases in mortgage interest rates; political instability and household budget pressures."

Westpac, CBA and ANZ all raised their variable home loan rates in the past few weeks, citing the need to protect profit margins in the face of higher wholesale funding costs.

The impact was clear on survey respondents paying off a mortgage, with their sentiment sliding 5.6 per cent in September.

In Canberra, the ruling Liberal Party ousted former Prime Minister Malcolm Turnbull late last month and replaced him with former treasurer Scott Morrison, just the latest bout of internal warfare in the party.

As a result, sentiment among Liberal coalition supporters dived 6.4 per cent in the month, while that for supporters of the Labor opposition climbed four per cent.

The mood also turned darker on the economy and finances. The survey's measure of economic conditions for the next 12 months eased 0.1 per cent since last month, and the measure for the next five years lost 5.8 per cent.

The bright spot in the survey was around consumer views on the labour market which showed a significant improvement across all the major states, said Evans.

"Improving conditions in the mining sector are starting to provide a lift in these states," he added. "A more evenly spread growth profile is starting to emerge across Australia."