Consumer confidence has taken a tumble over the past five weeks, dropping below ‘neutral’ for the first time since May 2009, according to the latest poll from Roy Morgan Research.

The ANZ-Roy Morgan Consumer Confidence index dipped 1.1 per cent in the week leading to May 25, which completes a 15 per cent decline since mid-April. This is discouraging news for retailers in Australia as a fall in confidence is often followed by a decrease in spending.

Primarily, Roy Morgan Research has attributed the waning confidence to announcements tied to the federal budget. Various policies began to make headlines approximately five weeks prior to this latest report, and Australians have responded by tightening their purse strings.

“While the policies from the budget are likely to be a modest drag on consumer spending over the next few years, the hit to confidence, if sustained, could prove to be more important,” Roy Morgan Research Head of Australian Economics (Corporate and Commercial) Justin Fabo said in a May 27 media release.

In addition to the Roy Morgan poll, the Westpac Melbourne Institute Index of Consumer Sentiment also saw a significant drop in confidence, falling from 99.7 points in April to 92.9 points in May.

Australian National Retailers’ Association Chief Executive Officer Margy Osmond responded to this decline, expressing concern for all industry stakeholders.

“Today’s dip in consumer sentiment is concerning for the retail sector. While it’s not unusual for confidence to dip in May following the federal budget, we don’t expect the reading to bounce back in June as we have seen in the past,” she said.

“Consumer confidence provides a general assessment of what’s happening in the marketplace. There’s no doubt that the heavy focus on the federal budget has given households every reason to be rethinking their household budget.”

Ms Osmond believes, however, that low and stable interest rates coupled with a strong economy are likely to help prevent consumer spending from dropping too low.

“Retail sales have been gradually growing for eleven consecutive months and the sector is beginning to experience some positive momentum. Retailers are hopeful that the sound of wallets across the country snapping shut on budget night is only temporary and this momentum continues,” Ms Osmond concluded

Retailers concerned about how falling confidence will impact their business’s bottom line are encouraged to contact a retail consultant to discuss marketing and recovery plans.