Australians have become steadily more gloomy since the first few weeks of the year, faced with a weak wage growth outlook and a rise in unemployment.
While the ANZ-Roy Morgan consumer confidence index did rise 1.6 per cent in the past week, ANZ senior economist Felicity Emmett says it has been trending down since late January, posing a risk to the household spending outlook.
She expects at least some of the recent decline in consumer confidence relates to the weak outlook for wages growth, including the mooted cut to penalty rates, as well as the rise in unemployment.
"There is a risk that households are becoming less confident about the medium-term outlook for income growth in an environment of high household debt," she says.
A separate analysis by Commonwealth Bank economist Kristina Clifton suggests people may have to wait until 2019 before wage growth gets back to some sort of normality.
Annual private sector wage growth has been in decline since early 2011, skidding to its lowest level in some 20 years at just 1.8 per cent.
There are a number of explanations for the decline, including heightened job security concerns as unemployment remains relatively high at 5.9 per cent, low inflation and a decline in commodity prices from a 2011 peak.
The underemployment rate, which measures people that have a job but would like to do more hours, has also risen to a record high of 8.7 per cent.
"The combination of underemployment and job security concerns means that people are unwilling to push their employers for a pay increase," Ms Clifton says.
CBA is forecasting a gradual decline in the both unemployment and underemployment rates from here.
Its modelling shows a drop in the underemployment rate to around seven per cent in early 2019 would see wages growth returning to its 10-year average of three per cent.
"It would take a sharp drop in the underemployment rate to around five per cent from its current value of 8.7 per cent to see wages return to a three per cent growth rate this year," she says.
The latest Essential Research poll found over a quarter of respondents saying the government should be doing more to address unemployment as one of its main priorities.
However, just three per cent believe cutting the company tax rate should be a priority while nearly a third thought the government should ensure big businesses pay their fair share of tax.
The Senate will voting on the government's 10-year company tax cut plan this week.
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