Australia’s one-man economic confidence machine, Malcolm Turnbull, continued to work his magic last week, inspiring another solid increase in sentiment on the back of improved perceptions towards Australia’s economic outlook.
According to the latest ANZ-Roy Morgan consumer confidence survey, the headline index rose 1.2% to 116.6, extending the bounce in sentiment to a third consecutive week.
The index now sits at the highest level seen since January 2014, with the survey’s four-week moving average, a better indicator of the overall trend in sentiment, pushing up to 114.6, above the series long-run average of 112.7.
The increase in confidence was driven by an increase in consumers attitudes about the economic outlook. Sentiment towards the long-term economic outlook surged 7.5%, overshadowing a smaller 2.8% bounce in near-term expectations. Demonstrating the profound effect Turnbull has had on economic sentiment, both have risen 23% since he replaced Tony Abbott as Australian prime minister.
Here’s the breakdown:
- Financial situation compared to a year ago 110.8 (0%)
- Financial situation next year 125.2 (-1.3%)
- Economic conditions next year 105.1 (+2.8%)
- Economic conditions next five years 114.3 (+7.5%)
- Time to buy a major household item 127.7 (-1.5%)
According to Warren Hogan, chief economist at ANZ, while the continued improvement in confidence bodes well for a sustainable acceleration in non-mining sectors, it’s still unclear whether the improvement will be sustained.
“Sentiment is now close to a two-year high, and consumers are showing improved confidence in the economic outlook. This turnaround in the outlook for the economy is an encouraging sign and may hold the key to a sustainable lift in non-mining economic activity.
The uptrend in confidence following the change in Australia’s political leadership is clear for all to see. The key now is to translate this community support into meaningful long-term policy reforms aimed at getting the government’s finances on a sustainable footing and developing an economy of the future.
An important question is whether this lift in confidence can be sustained and translate into stronger consumer spending. A softening housing market, ongoing weak wages growth, and elevated unemployment will present a considerable headwind to the recent increase in optimism, making the government’s economic policy platform even more important over the next 6-12 months.”
While softening house price growth may act as a headwind to sentiment next year, it is clear that the labour market will also play a crucial role in determining whether the bounce in sentiment will act as a precursor to an acceleration in household consumption. Without job security households are unlikely to increase their spending, with or without house price increases. To many, having a steady and reliable income may be a far more significant factor when it comes to spending habits.
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