The ANZ-Roy Morgan Consumer Confidence climbed for the third straight week, with a brighter outlook for long-term economic growth offset by concern around household finances.
The confidence index climbed by 0.9% last week to a reading of 112.3, which is still slightly below its long-term average:
ANZ’s head of Australian Economics David Plank identified signs of improvement in Australia’s labour market as one driver of recent increases in the index.
“ANZ Job Ads and other business surveys point to further gains in employment in coming months, following on from the strong result in March,” Plank said.
Household expectations for both the near-term (within 12 months) and longer term (five years) economic outlook both jumped last week, rising by 5% and 4.9% respectively.
Both readings are still noticeably below their long-term average, although the five-year outlook has now hit its highest level since mid-February:
Sentiment towards household finances was mixed, with views towards current financial conditions falling by 3.3% last week.
That more than offset a rise of 2.6% the week before, while the view towards long-term financial conditions rose slightly by 1.2%.
Plank said that while recent steady rises in consumer confidence were encouraging, sentiment towards household finances was unlikely to reach the levels seen in the second half of 2016.
That ties in with comments from RBA governor Philip Lowe last week, who noted the economy was more susceptible to reduced household spending as consumers focus on financing their mortgages.
This chart shows the fall in household’s views towards their finances since the 2016 peak:
“As pointed out by the RBA, household balance sheets are somewhat stressed because of high levels of debt and low wage growth. The outlook for spending remains under pressure as households adjust to this reality,” Plank said.
“Today’s retail sales release should provide more information on this front. We expect only a modest pickup in March, following the fall in February. We will then look to see whether this evening’s Budget provides any reason to expect a major move in household sentiment.”