Australian consumer confidence rose fractionally in March, leaving it sitting near the highest levels in four years.
The Westpac-MI consumer sentiment index rose 0.2% to 103.0 in the latest survey, just off the four-year peak of 105.1 set in January this year.
A reading of 100 is deemed neutral, meaning that optimists and pessimists are in an equal number. A reading above 100 indicates that optimists currently outnumber pessimists, albeit by a small margin.
“Sentiment continues to hold in slightly optimistic territory with March marking the fourth consecutive monthly reading above the 100 level,” said Matthew Hassan, Senior Economist at Westpac.
“However, the Index is still well below levels typically associated with a robust consumer.”
After being dragged lower by renewed financial market volatility in February, Hassan said those concerns were replaced by those surrounding the long-term prospects for the Australian economy.
“The survey detail suggests a recovery from last month’s market volatility has been mostly offset by new concerns about longer term prospects for the economy,” he said.
“Broadly positive monthly moves [in the surveys other subindexes] were almost entirely offset by a 4.1% fall in the ‘economic outlook, next 5 years’ subindex.
“The pull back in March may reflect increased tensions around global trade following the announcement of tariff increases on steel and aluminium in the US.”
As seen in the table below, that large drag offset stronger sentiment levels when it came to near-term economic prospects, along with those on family finances.
Despite booming growth in employment over the past year, that did not help to boost sentiment towards the labour market with the survey’s Unemployment Expectations Index rising 1% to 121.8.
A higher reading indicates that fewer Australians expect unemployment to fall in the year ahead.
“Consumers were a little less confident around job prospects in March,” Hassan said, adding that views towards job security have still improved significantly over the past 12 months, fitting with stronger labour market conditions in Australia.
On housing, another market that Australians have a keen eye on, Hassan said readings in the latest survey were mixed.
“The ‘time to buy a dwelling’ index edged 0.8% higher to 104.5 and continues to show a clear improvement from its mid-2017 lows,” he said.
However, views towards the outlook for prices deteriorated from a month earlier.
“The House Price Expectations Index fell 4.2%, retracing most of last month’s 4.8% rise,” Hassan said, noting that the index, at 129.6, “remains slightly above its long run average of 127.5”.
Fitting with recent house price data released by CoreLogic, Hassan said expectations were notably weaker in New South Wales with a state reading of 115.8.
Fitting with subdued views towards the housing market, respondents continued to express caution when it came to the wisest place to invest new savings with safer options such as paying down debt, term deposits and diverting fund towards superannuation once again dominating the list.
“Responses continue to indicate high levels of risk aversion,” Hassan said.
“Nearly two thirds of consumers still favour safe options — deposits, superannuation or paying down debt — with only 11% nominating real estate and 8% nominating shares.
“Indeed, more consumers favour ‘pay down debt’ than those favouring real estate and shares combined.”
So while optimism is on the rise in Australia, it’s still yet to break the shackles of consumer caution which has dominated in the years following the global financial crisis.