Consumer confidence in Australia has soared to an almost three-year high, propelled by record low interest rates and the election of a coalition government.
The Westpac Melbourne Institute Index of Consumer Sentiment, released on Wednesday, increased by 4.7 per cent in September to 110.6 – its highest point since December 2010.
Westpac chief economist Bill Evans said although the survey was mostly conducted before Saturday’s election, between September 2 and 8, it was clear the election outcome played a big part in the confidence boost, along with record low interest rates.
“This is a very strong result,” Mr Evans said.
“It was really only the last day of the survey that covered the actual election result although media coverage pointed strongly to a coalition victory throughout the survey period.
“I think it is reasonable to conclude that the election result played an important, if not leading, role in this strong boost to consumer sentiment.
“The result is comparable with the boost to the index in March 1996 when the coalition was returned after 13 years in opposition.”
CommSec chief economist Craig James said confidence usually lifted before and after elections.
“The main reason for the lift in sentiment is removal of uncertainty and a perception that the economy will get back to normal with consumers and businesses spending, investing and employing again,” Mr James said.
“Certainly, there are few reasons for people to be glum with interest rates and unemployment at historically-low levels.”
Mr James said the survey showed consumer conservatism was thawing, with people now less willing to use spare cash to pay down debt.
HSBC chief economist Paul Bloxham said the political uncertainty ahead of the election had dampened business sentiment, which in turn, led to consumer uncertainty about job prospects.
The turnaround in confidence meant the Reserve Bank may not need to cut rates further, he said.
“An improvement in sentiment is a much needed part of Australia’s great rebalancing act,” he said.
Source: AAP