The Australian dollar jumped in value against the US dollar today after Reserve Bank Governor Glenn Stevens said he could see promising signs of a return to confidence by Australian businesses and consumers.
He told a conference in Hong Kong: “Recent data shows stronger household consumption over the summer. The latest surveys and our own liaison confirm this, and suggest that retailers are more optimistic than they were a year ago.”
However, the Reserve Bank expects consumption spending to grow in line with income or perhaps a little faster but not at the pace seen in the years prior to the before financial crisis.
“We certainly see abundant signs of confidence in the housing market,” Stevens told the 17th Annual Credit Suisse Asian Investment Conference.
“Dwelling prices have seen a broad-based rise of 10 per cent in the past year and are now about 5 per cent above the previous peak in 2010.
“Initially this was not associated with very much at all in the way of faster housing credit growth. That has now picked up a little, though it remains far below the rates seen in the 1990s and 2000s.
“The pick-up is most noticeable for investors, who need to take care with the amount of leverage they take on.”
He sees dwelling construction activity rising strongly. Over the past three months, approvals to build private dwellings were at the highest rate for at least three decades.
“Measures of business confidence have improved over the past six months,” he says.
“Businesses seem, so far, to be taking a cautious approach to investment, however: they are waiting for stronger, more persistent signals of improved conditions before committing to significant increases in capital expenditure.
“That’s actually pretty normal in a cyclical upswing. In their hiring decisions there are some early promising signs of improvement, though it is too soon to see much in the way of concrete evidence of stronger gains in employment yet.”
He says there is encouraging early evidence that the so-called ‘handover’ from mining-led demand growth to broader private demand growth is beginning.
“Putting all this together, we think economic growth will continue, and may strengthen a little later this year and pick up further during 2015,” Stevens says.
A short time ago, the dollar was trading at 91.75 cents against the US dollar, up around 0.13%, down from a high of 91.82.