The latest Westpac-Melbourne Institute index of consumer sentiment was published last week. It showed a continuing drop in confidence. Australians' confidence in the economy has declined to the lowest level for 16 years, particularly among the more wealthy. Westpac chief economist Mr Bill Evans suggested the most recent fall was due to higher petrol price and to rising inflation.
Although to the amateur, forecasting future trends on the basis of consumer confidence may seem as arcane as the Roman practice of examining bird entrails, a little reflection suggests why confidence matters.
If we are gloomy about the future of the economy we are likely to spend less. If we spend less, shops will sell less and factories will make less. If they sell and make less, they will earn less and need fewer workers. All that may mean less desire to borrow money and so lower interest rates.
But of course on each scale of this economic snake, peoples' lives change. Dismissed employees find it hard to get new jobs and to pay mortgages. Anxiety and pressure rise and, as we deal with them inappropriately, family harmony and community cohesion are also made more precarious.
So confidence matters to people as well as to economists. Even if governments can't do much about the price of petrol or the cost of borrowing money, they still talk up the economy and try to encourage confidence. Fairly ineffectively, it must be said. Governments are seen as deserving scapegoats, not as the cause of economic troubles.
The human hardship associated with economic difficulties points to the need, both in individuals and in society, for a deeper source of confidence. We need to trust that, come what may, we will survive and that what matters more deeply to us can be maintained even in economic struggle. This confidence goes deeper than economic good times.
Governments can do a little to foster this confidence. It helps us be confident if we know that when all else falls apart there is a network of social security that would enable us, at least inadequately, to feed ourselves and find shelter and medical care for our family.
Governments can also enable more important things. For people who live in destitution in third world cities, any deeper confidence they may have to face the day comes from their trust in the resources of their indigent communities. If people have something,