Pushing aside out-of-cycle mortgage rate increases from Australia’s largest banks and weakness in stocks, sentiment among Australian households rose strongly last week with the ANZ-Roy Morgan consumer confidence index rising 1.6% to 115.2. The index now sits well above its long-run average of 112.7, with the survey’s four-week moving average, a better gauge on the trend in sentiment levels, now sitting at the highest level seen since February 2014.
According to ANZ, the continued uplift in sentiment is largely due to one thing, or one person in this instance: Malcolm Turnbull.
Since he displaced Tony Abbott as Australian PM in mid-September, consumers perceptions towards the near-term economic outlook have soared. Demonstrating this point, the survey’s economic conditions over the next year subindex soared by another 5.1% last week, leaving the total gain since Turnbull became PM at an impressive 25%. Perhaps reflective of the improved outlook towards the economy, perceptions on family finances – both looking backward and in the year ahead – recorded solid increases of 6.7% and 1.5% respectively.
The full breakdown of the surveys subindices is found below.
- Financial situation compared to a year ago 110.8 (+4.8%)
- Financial situation next year 126.9 (+1.5%)
- Economic conditions next year 102.2 (+5.1%)
- Economic conditions next five years 106.3 (-3.3%)
- Time to buy a major household item 129.6 (-1.4%)
Given the faith Australia’s public have put in the new PM, ANZ chief economist Warren Hogan believes the government will need to deliver a clear and credible economic platform to help counteract negative influences stemming from the housing market.
“It is encouraging to see that consumer confidence has remained elevated above its long run average in the past few weeks. The significant improvement in consumers’ view towards the economic outlook has been important in this trend, with confidence in the new government appearing to offset the recent increases in variable mortgage rates and signs of slowdown in house price growth.
Households will be looking for the Turnbull government to deliver a clear and credible economic platform to return the economy to trend growth. This will be critical in the face of a slowing housing market.”
While a clear and credible economic platform to return the economy to trend growth would be an added bonus, one has to wonder if recent chatter about the RBA cutting rates may have helped bolster sentiment near-term. Following the weak September quarter inflation report released last week, expectations for a rate cut from the RBA in November rose sharply. While there is little doubt that Turnbull has helped turn sentiment levels around – the bounce in confidence came well before any talk of rate cuts occurred – it will be interesting to see what the index will do next week should the RBA leave interest rates unchanged today.
The RBA will announce its November monetary policy decision at 2.30pm AEDT. Markets remain evenly split on whether or not the cash rate will be reduced to a new record low level of just 1.75%.