Australian consumer confidence rebounded strongly last week, recovering after hitting the lowest levels of the year in mid-February.
The ANZ-Roy Morgan consumer confidence index surged by 4.7%, led by improved sentiment towards the outlook for household finances.
The headline index now stands at 116.7, well above its long-run average of 112.9.
Making the performance all the more impressive, the survey was conducted after news broke that Australia’s Fair Work Commission decided to reduce weekend penalty rates for some of the nation’s lowest paid workers, a factor that some commentators, analysts and politicians suggested would harm confidence levels further after a spate of low wage growth readings recently.
Those concerns, for the moment, appear unfounded, especially given the strength in the survey’s readings on finances last week.
“Households’ views of current finances rose a sharp 9.3% in the week ending 26 February, more than reversing last week’s 7.5% fall,” said Jo Masters, senior economist at ANZ.
“Sentiment towards future finances also rose a solid 6.3% bringing the index to its highest value since March 2016.”
That’s a really impressive result, and one that bodes well for household spending given the relationship between perceptions on finances and household consumption levels, the largest component in Australian GDP.
Masters said that strength in Australia’s east coast housing markets, along with elevated domestic stock prices, were likely supportive factors behind the strong rebound reported.
Adding to the robust result, views on the economic outlook — both near and longer-term — also improved, albeit by a smaller margin.
“Sentiment towards the 12 month outlook bounced 4.4% while sentiment towards the longer term outlook rose a more modest 1.7%,” said Masters.
The final component within the survey — whether now was a good time to buy a household item — rose by a further 2.5%, its third consecutive weekly increase. It now stands at the highest level since early January.
Masters described the result as “quite encouraging”, particularly the rebound in views towards current financial conditions which is “holding well above its long term average despite ongoing soft wage growth”.
Looking ahead, she says Australia’s Q4 GDP report — released on Wednesday — will likely prove to be influential on near-term confidence levels.
“The GDP report is expected to show a healthy rate of growth in the economy, after the surprising contraction in Q3, and confirmation of this could support consumer confidence, particularly around the economic outlook,” she says.