Australian consumers appear to have applauded the change of leadership in the Liberal party with a surge in confidence over the past week.
The ANZ-Roy Morgan weekly consumer confidence index surged 8.7% in the week ending last Sunday. That more than wipes out the recent falls which saw confidence plunge 7.1% in the previous two weeks and leaves confidence “above long run average levels”, ANZ chief economist Warran Hogan said.
This is good news economically and could have a positive impact on spending and consumption given the broad-based nature of the gains.
“The bounce in confidence was broad-based across the subindices. In particular, views on economic conditions over the next year jumped 25.8%, the second largest one-week gain since the weekly series began in 2008. Confidence in the economy over the next five years also gained a robust 13.4%, but remains well below its long-run average,” the ANZ said.
That’s good news. But Hogan said that for the bounce to be sustained, “the new Prime Minister and his colleagues will need to deliver a medium-term reform strategy in the context of a clear economic story for the country”.
But Hogan also highlighted that:
Reform creates both winners and losers in the short-term. The challenge for the Prime Minister is to effectively communicate that changes to the way the economy operates are in the community’s medium-term interest and necessary to raise incomes, create high value jobs, and sustain investment.
“We believe the new Prime Minister’s first 100 days in office will be essential to formulating a new narrative for the economy that underpins confidence in the economic outlook,” Hogan said.
He added that “clear economic strategy is critical. Otherwise, consumer caution and gloom in the long-term outlook could easily re-emerge, given weak wages growth and sub-par global economic activity.”
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