The Economy: Consumer confidence plummets (six days late!)

To have
credibility the Australian media must report news when it occurs, not six days
later as occurred with today’s press publicity of the latest Westpac-Melbourne
Institute consumer confidence “crush”. In today’s Herald Sun, Terry McCrann –
Australia’s most widely read business communicator – accurately reported that the
slump in consumer confidence was first shown by the Roy Morgan Consumer
Confidence Rating (and published in Crikey!) last Friday, and subsequently
reported in The
Australian on Monday and The Age on Tuesday. There
has been no mention of the Roy Morgan figure in the Australian Financial Review,
which looked on by many, obviously now fewer, as Australia’s
leading business newspaper.

What is more confusing is the fact that Westpac-Melbourne Institute
describes the last month’s plunge in consumer confidence as the largest
fall since it began measuring in 1975. The truth is that the 1975
figure to which it is referring is Roy Morgan’s estimate, not
Westpac’s. Today nobody is told who conducts the Westpac-Melbourne
Institute consumer confidence interviewing – but love it or hate it,
everyone knows Roy Morgan Research has been conducting its own
interviewing since 1941.

The
Westpac-Melbourne Institute consumer confidence today shows consumer sentiment
fell 16.2% to 90 points this month. The Age and The
Australian websites both ran with this “new” data,
blaming the RBA’s interest rate hike and the rising price of petrol. The Roy Morgan Consumer
Confidence Rating,
released last Friday, showed that consumer sentiment plunged by 14.4 points to
103.7, its biggest one month fall since the Roy Morgan rating began measuring in
1973.

Roy Morgan and Westpac-Melbourne Institute ask exactly the same
questions to measure consumer confidence. Apart from Westpac-Melbourne
Institute using phone-based interviewing and Roy Morgan using
face-to-face, the only difference between the two measures is that
Westpac-Melbourne Institute “seasonally adjusts” its figures and Roy
Morgan does not. However, Henry doesn’t know how you can seasonally
adjust consumer confidence, given that it is driven by interest rates
and petrol prices, not seasons. You can’t seasonally adjust the gold
price or violence in the Middle East!

Careful readers of
these pages will be aware that Henry has been
going on for some time about the dangers of inflation and related matters. Well, now it’s official –
“Brace Yourselves”, says Treasurer Costello. John Garnaut helps the Treasurer
tell it like it is via the SMH: “Investors and home
owners have received a rare, dire warning from the Treasurer to brace for the
economic fallout from “world record oil prices”.”

Garnaut’s article
is well worth reading carefully. We wish the Treasurer, his department
and incoming Reserve Bank governor Glenn Stevens good luck in getting the
Australian economy under control with the least possible damage. Henry, as
usual, will continue to offer advice on the matters on
hand.