The Westpac McDermott Miller consumer confidence index fell to 113.0 in the June 2015 quarter, down from 117.4 in March. This is the lowest level since March 2013, when the index was 110.8.

However, confidence remains slightly above its historical average of 111.5.

“The drop in consumer confidence isn’t surprising given the steady drumbeat of bad news around the dairy sector,” commented Westpac chief economist, Dominick Stephens. “Consumers are distinctly less upbeat about economic prospects than they were three months ago.

“Despite these economic concerns, people’s reported attitudes to spending are still pretty positive.

“Consumers aren’t battening down the hatches just yet.”

He added that consumer confidence will face tougher challenges later this year. “The reality of a lower dairy payout is only starting to hit farmers’ cash flows, and the recent drop in the exchange rate will result in a range of imported goods becoming more expensive. We wouldn’t be surprised to see confidence fall further from here, though lower mortgage rates will provide relief for borrowers.”

The survey was conducted over June 2 to 13, with a sample size of 1581. An index number over 100 indicates that optimists outnumber pessimists. The margin of error in the survey is 2.5 per cent.

Among the index’s component questions, the biggest change was to respondents’ expectations for the near-term economic outlook, with a net 4.8 per cent now expecting mainly good economic times for the year ahead, down from 23.8 per cent three months ago.

There were also more modest declines in respondents’ longer-term economic outlook and their expectations for their own financial situation. The net percentage expecting mainly good economic times over the next five years fell from 26.8 per cent to 24.3 per cent, while the net percentage expecting their own finances to improve over the year ahead fell from 9.8 per cent to 5.9 per cent.

When asked about current conditions, respondents were slightly more positive than three months ago. The net percentage saying their financial situation had improved over the past year increased from -1.4 per cent to 1.4 per cent, while the net percentage saying it was a good time to buy a major household item rose from 27.8 per cent to 28.8 per cent. Both these responses are still comfortably above average, though down slightly from their recent peaks in early 2014.