The Westpac-Melbourne Institute Consumer Sentiment Index fell 5.7 per cent to 91.1 in December – its lowest level since August 2011.
“These showed that the economy had been limping along at a 1.6 per cent annualised growth pace for the last six months, with national incomes declining and overall activity contracting in the quarter in every state except New South Wales,” he said.
“Respondents may have been particularly unnerved by media references to an ‘income recession’.”
Mr Evans said respondents are concerned about the outlook for the economy and job security.
“In addition, there is ongoing disillusionment about the May budget, six months after it was announced,” he said.
The individual components of the index are also pointing towards a softening in spending. With one exception, all components of the index were down: the sub-index tracking views on ‘family finances versus a year ago’ rose 1.6 per cent, but ‘family finances, next 12 months’ was down four per cent, ‘economic conditions, next 12 months’ fell 9.7 per cent and ‘economic conditions, next five years’ was down 1.8 per cent.
“It is important to remind people that we have record low interest rates, lower petrol costs and energy bills have come down since the carbon tax was removed, so there is more money in people’s wallets,” Australian National Retail Association CEO Anna McPhee said.
“This has been reflected in more people coming back to retail in the last 12 months, despite poor confidence readings, and delivered growth to the sector and the economy more broadly.”