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April 10th, 2013 
CONSUMER confidence has dipped again, creating another headache for retailers after the central bank warned economic growth wasn’t likely to pick up before next year.
Confidence dropped by a surprising 5.1 per cent in April after two months of solid increases, prompting survey producer Westpac to highlight the fragile mood among cash-strapped households.
The bank’s chief economist Bill Evans said it appeared to be a reaction to global economic concerns, including the crisis in Cyprus where bank account holders are being taxed to pay down country debt.
“Concerns about a potential rise in interest rates may have also weighed on the index,” Mr Evans said in a statement.
The Reserve Bank of Australia’s official cash interest rate has been lowered to three per cent, from a high of 4.75 per cent in November 2011 when the current easing cycle began.
Signs have emerged recently that the rate cuts were finally working on the economy, buoying retail sales and approvals for new building construction.
This led financial markets to mark down the chances of more cuts this year and look to the possibility of a rise in interest rates.
But RBA assistant governor in charge of economics, Christopher Kent, on Wednesday said domestic growth still had a way to go before returning to “normal” – or trend – growth of about 3.25 per cent.
“Pulling all of this together suggests that growth for the economy as a whole will be a little below trend this year and then pick up gradually through next year,” he told the Bloomberg Australia economic summit in Sydney.
This means economic conditions could remain soft for some time, prompting consumers to hang onto their money and leading to another gloomy year for the retail sector.
Australian National Retailers Association chief Margy Osmond said consumers were wary of “monsters under the bed”.
“Aussie consumers don’t need much to scare them back to saving and put spending on hold,” she said in a statement.
The Westpac-Melbourne Institute index of consumer sentiment fell to 104.9 points in April, from a two-year high of 110.5 points in March.
While Dr Kent believes lower interest rates can still underpin a pick-up in housing construction and non-mining businesses, despite the dampening effects of the strong Australian dollar.
But he thinks the impact will be modest.
“Our expectation is that there will be a gradual recovery in non-mining business investment and further moderate growth of dwelling investment,” he said.
Meanwhile, Treasurer Wayne Swan on Wednesday again warned the decline in government tax revenues, which has already destroyed Labor’s 2012/13 budget surplus plan, was likely to continue.
“We’ve seen the global economy take a sledgehammer to our budget revenues,” he told the Bloomberg summit.
“We’re seeing further hits to revenues and it’s clear this will be felt right across the forwards (forward budget estimates).
The government hands down its budget in May and already there are expectations the 2012/13 deficit could be as large as $20 billion.
Opposition finance spokesman Andrew Robb said Mr Swan should stop complaining about revenue.
“This government has a spending problem, not a ‘woe is me’ revenue problem,” he said in a statement.
“Revenue continues to grow steadily, it just doesn’t keep up with Labor’s inflated revenue forecasts.”
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