27 May 2013

Fall in commodity prices hurting consumer sentiment

9:33 am on 27 May 2013

The latest monthly Westpac survey in Australia found a second consecutive sharp decline in consumer sentiment in May.

Radio New Zealand's Sydney correspondent reports the survey was taken the week of the federal budget, in which the government unveiled a worse than expected deficit due to a slump in corporate tax revenues and the impact of a strong Aussie dollar.

Only 5% of survey respondents thought they would be better off as a result of the budget, while some 44% thought they would be worse off.

The Reserve Bank of Australia responded to softening conditions ahead of the budget by cutting interest rates for the first time this year.

And Westpac reckons continuing declines in sentiment could lead to further cuts.

Expectations ahead of reality

Australians' biggest problem is they have had it so good for so long and their expectations about what governments can do are probably running ahead of reality.

In a post-budget speech, Treasury Secretary Martin Parkinson warned of a big gap between what the community demands of government and what they are prepared to pay for.

Mr Parkinson said that to return to surplus, the Australian government is either going to have to keep outlays down - and no-one wants less services - or it is going to have to increase receipts.

Radio New Zealand's Sydney correspondent reports that's another way of saying taxes are going to have to go up.