On a range of measures, Australians have been feeling more chipper about things over the past four months.
Treasurer Scott Morrison and his boss Malcolm Turnbull have taken note and are talking it up.
Stubbornly low levels of consumer and business confidence have been a feature of the Australian economic landscape for the past two years. There appears to have been some relief following Turnbull’s ascension to the prime ministership.
You don’t have to go far to find people who believe Turnbull has a better command of the challenges facing the economy than Tony Abbott and his treasurer Joe Hockey did.
Surveys that ask people how they are “feeling” about the economy might seem like a woolly concept at first pass. But it is important enough that the governor of the Reserve Bank and the hardass new treasury secretary John Fraser told the Abbott cabinet early last year that low levels of confidence were holding the economy back.
Sustained low levels of confidence have the capacity to restrain spending decisions. Consumers who are worried about their job prospects are more likely to squirrel away some money. Businesses are less likely to make major investment decisions.
For the Australian economic equation right now, increased activity levels across big sectors like retail, professional services, and tourism are vital to ensuring the economy keeps its momentum as mining activity falls away as rapidly as we are seeing. People feeling like it’s OK to buy stuff, pay for advice and input, and take holidays is critical.
Scott Morrison says this is now central to the government’s economic and political strategy. The Australian reports today (emphasis added):
Mr Morrison said the government’s decisions and policies over the year would be aimed at cementing the gains in confidence and avoiding anything that could act as “handbrake or undermine confidence”.
While the budget update last month had lowered forecast growth in household consumption by 0.25 percentage points to 2.75 per cent this year and 3 per cent in 2016-17, the Treasurer said this was “still positive and still very strong”.
“This will be a key factor for the economy in 2016 and afterwards, that’s why confidence has been so important,” he said. “That’s why the Prime Minister and I have been very pleased with the movements in confidence indicators in recent months, and that needs to be continually reinforced by the decisions we’re making and the policies we’re announcing.”
This is not without its risks. Confidence is fickle and there are many factors far beyond the government’s control that can suddenly reverse it – the obvious ones being security incidents overseas or a downturn in the outlook for major economies.
But with Morrison starting off the year talking up the increased confidence levels, it’s a good time to review the data, which Morrison and Turnbull are clearly watching closely. Here’s a recap of where the major indexes are at.
The ANZ-Roy Morgan weekly consumer survey shows confidence back above its long-run average, with a big spike after Turnbull rolled Abbott
The benchmark Westpac consumer sentiment survey has posted some strong results in recent months but still has headroom
The NAB business survey has shown a strong lift in conditions – what businesses are experiencing in trading – and confidence is being pulled up alongside it
Just before Christmas, we published some data obtained exclusively from the Commonwealth Bank that showed credit and debit card transactions were running at a thumping 29% increase for December compared to the previous year. Even with the increased prevalence of cashless payments this is a substantial rise which suggests the elevated consumer sentiment levels shown in the ANZ survey are translating into consumer spending decisions.
We’ll get updates over the coming weeks to all of the major confidence measures. Morrison and Turnbull are yet again putting a spotlight on it as a measure of how they are performing. How they prosecuting an economic and political agenda that builds confidence over the coming months with all of the economic challenges the country is facing will be a fascinating — and risky — experiment.