Consumer sentiment decline most likely only temporary

There is a good post at Macro Business by blogger Delusional Economics on Westpac’s consumer sentiment index, which has fallen sharply in Queensland:

Sentiment nosedives in Queensland

I expect consumer sentiment will rebound when next month’s budget reveals public service cuts won’t be as large as originally flagged, as suggested by comments from the Premier today reported by the Brisbane Times:

Mr Newman today tried to play down the 20,000 job cuts rumoured to be confirmed in the state budget next month.

“I don’t think we’ll see that many people go. We’re doing everything we can to make sure we don’t lose that many people,” he told the network.

My experience with government budgets is that courageous reductions in expenditure made in the early weeks of the budget process tend to get a lot smaller by the time the budget is printed. I expect the boffins in Queensland Treasury are working late nights as they continually update budget measures and re-estimate the budget bottom line for each new budget review committee meeting.

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