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Boost in Consumer Confidence After Budget

Boost in Consumer Confidence After Budget
May 19, 2015

Consumer Confidence has jumped to its highest levels since November according to the ANZ-Roy Morgan consumer confidence index. The survey reported on Tuesday that consumer confidence jumped 3.6 per cent in the week ending on 17 May, to 114.6 points. This is a marked improvement compared to the four-week average of 111.4 points and the total monthly average for the entire series of 112.7 points. The bank attributed the boost in confidence to the Commonwealth Budget that was released previously.

In 2014, the index dropped sharply after the Budget announcement. “In contrast to last year's Budget, consumer sentiment has risen in both the lead-up to and the immediate period after Budget night,” said ANZ chief economist Warren Hogan. "The initial positive reaction of Australians to last week's Budget is great news for the economic outlook.” Mr. Warren noted that the 3.6 per cent weekly rise in confidence was almost twice the average weekly move of 2 per cent. He also cited the two interest rate cuts as partial contributors to consumer spending and business investments.

The private sector has also reacted positively to the Budget announcement, although Mr. Hogan noted that the budget would only provide a temporary boost to private sector confidence. “The fragility of confidence over the last 18 months or so suggests that a continuing improvement cannot be taken for granted, even in the presence of rising asset markets and low interest rates,” he said. “While government policy and political instability may recede as a concern for households in the near-term, we expect that job security will remain front and centre for Australians in their assessments of not just their own financial situation, but also the outlook for the economy.” Mr. Hogan said that unemployment would likely be the key indicator for the survey’s sentiment in the short and medium term.

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