Australian Consumer Confidence Is 2 Year High

In August the Australian consumer confidence has raised another 4 percent. This reached it to nearly two year high. The report comes from the Westpac-Melbourne Institute Consumer Sentiment Index. The index is an average of five component indexes which reflect consumers' evaluations of their household financial situation over the past year and the coming year, anticipated economic conditions over the coming year and the next five years, and buying conditions for major household items. Assessments about future unemployment are also recorded.

The consumer sentiment in Australia now has reached to 3.7% in
August from 109.4 in July to 113.4 in August.

Westpac Senior Economist, Matthew Hassan said that as far as the consumers are concerned the worst of the economic recession is behind. For them it seems that the downturn in the Australian economy has passed. The optimism may well spread throughout of the world as Australia is a major economy and trading partner for USA and other top global markets.

Two key economic developments would have helped the consumer mood in August. The first was official ABS figures showing house prices rose 4.2% in the June quarter. The gain meant prices have now recovered most of the ground lost since the start of last year and would have gone a long way towards dispelling any lingering concerns that local housing markets could be headed for the sort of double-digit declines seen abroad. The other major positive was the surprisingly strong July labour market result – which showed an unexpected rise in employment and the unemployment rate stabilising at 5.8%.

These two pieces of news helped alleviate two of the biggest sources of consumer anxiety over the last year: fear of losing money on their biggest single asset – the family home – and fear of losing their jobs.

Consumers’ assessments of their own finances continued to improve in July, reads the press release of the organization that conducted the study. The Index measuring opinions on "Family finances compared to a year ago" rose 1.3% but at 82.8 it remains firmly in negative territory. Fiscal injections and interest rates cuts have not been enough to fully offset the hit to household finances over the last year from weakening labour markets, falling equity markets and patchy house prices. Expectations for "family finances over the next 12 months" are more positive though, with this component rising a robust 3.3% to an overall reading of 121.1. Notably, gains in both have come despite an end to the $12.7bn in fiscal payments to households, the last of which would have been disbursed in June.

Written by Armen Hareyan
Materials from Westpac-Melbourne Institute Consumer Sentiment Index are used in this report.