Consumer confidence slides as prices rise

Consumer confidence has slipped for the second quarter in a row in the Westpac McDermott Miller survey.

The survey's index fell from 116.9 in December to 114.7 this month. Any number over 100 signifies more optimists than pessimists.

Westpac chief economist Brendan O'Donovan said not much had gone the consumer's way in recent months, with food and petrol prices rising, unemployment worsening and house prices falling again.

At its present level, confidence was consistent with a steady but unspectacular recovery in consumer spending, O'Donovan said.

Of the survey's component questions the only one to improve was whether now was a good time to buy a major household item.

"The high exchange rate is about the only thing that worked in consumers' favour recently, by driving down prices of many goods, including consumer durables like cars and appliances."

The survey added a question about changes to the tax and benefit system.

Details will not be known until the Budget on May 20, but the indications from the Government, so far, are that income tax will be cut, GST will be raised, the rules on property investment tightened and superannuation, benefits and Working for Families tax credits increased.

Survey respondents were asked if they expected changes to the tax and benefit system over the next 12 months to have a positive or negative effect.

The results split down the middle, with 33 per cent expecting a positive effect, 34 per cent a negative one and 22 per cent no effect.

The most affluent were the most positive, while those in the lower socio-economic groups were pessimistic, with negative responses outweighing positive ones by 18 percentage points.