Gloom rules for first time since quake

People are pessimistic about short-term prospects but more upbeat in their five-year view. Photo / Martin Sykes

Pessimists marginally outnumber optimists in the latest Westpac McDermott Miller survey of consumer confidence.

The quarterly survey's index slipped 2.5 points to 99.9, the first time it has been in negative territory since the immediate aftermath of the February earthquake last year and before that March 2009 when the economy was contracting.

"The fall in confidence reflects greater anxiety about the year ahead, outweighing an improved perception of present conditions," Westpac economist Felix Delbruck said.

Past experience suggests how people feel about the present is what matters for how much they actually spend, he said. "On that basis we expect spending to continue growing at a moderate rate for now."

The index summarises the balance of optimistic and pessimistic responses to five questions:

* How people's financial situation has changed over the past year.
* Whether now is a good time to buy a major household item.
* Their expectations for their financial situation over the coming year.
* The near-term and longer-term outlook for the economy as a whole.

On balance, 17 per cent feel worse off than a year ago, but that is an improvement from 20 per cent in March and the best reading for that indicator since mid-2010.

A net 20 per cent consider it a good time to buy a major household item, up from 17 per cent three moths ago.

However, a net 1 per cent expect their finances to be worse in a year's time, when a net 7 per cent expected improvement three months ago.

A net 29 per cent expect bad times for the economy over the year ahead, compared to 19 per cent in March.

The five-year view is more upbeat, a net 29 per cent expecting improvement, unchanged from the previous survey but still less optimistic than at any time since mid-2008.

"Over the past three months fixed-term mortgage rates have fallen to record lows, the housing market has continued to pick up, and petrol prices have fallen," Delbruck said.

"Those groups that tend to hold bigger mortgages, the middle-aged, and those with middle and higher incomes, felt better off than they did three months ago, whereas the young, the old, and lower-income groups all felt worse off."

The Budget confirmed that government cutbacks were set to continue, while Europe remained a potential source of disaster.

McDermott Miller managing director Richard Miller said public sector workers were particularly gloomy about short-term economic prospects, with a net 40 per cent expecting bad times over the next 12 months, compared to 24 per cent of private sector workers, and they were more inclined to blame the Government.